Oil, Gas and Conflict: A Mathematical Model for the Resource Curse

Oil and natural gas are highly valuable natural resources, but many countries with large untapped reserves suffer from poor economic and social-welfare performance. This conundrum is known as the resource curse. The resource curse is a result of poor governance and wealth distribution structures tha...

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Bibliographic Details
Published in:PloS one 2013-06, Vol.8 (6), p.e66706
Main Authors: Cai, Yiyong, Newth, David
Format: Article
Language:English
Subjects:
Algorithms
Armed Conflicts - economics
Armed Conflicts - psychology
Capital
Climate Change
Economic models
Economics
Mathematical analysis
Mathematical models
Mathematics
Models, Theoretical
Natural gas
Natural Gas - economics
Natural Gas - supply & distribution
Natural gas reserves
Natural resources
Natural Resources - supply & distribution
Oil
Oil reserves
Petroleum - economics
Petroleum - supply & distribution
Politics
Residential energy
Social and Behavioral Sciences
Socioeconomic Factors
Violence
Warfare
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Summary:Oil and natural gas are highly valuable natural resources, but many countries with large untapped reserves suffer from poor economic and social-welfare performance. This conundrum is known as the resource curse. The resource curse is a result of poor governance and wealth distribution structures that allow the elite to monopolize resources for self-gain. When rival social groups compete for natural resources, civil unrest soon follows. While conceptually easy to follow, there have been few formal attempts to study this phenomenon. Thus, we develop a mathematical model that captures the basic elements and dynamics of this dilemma. We show that when resources are monopolized by the elite, increased exportation leads to decreased domestic production. This is due to under-provision of the resource-embedded energy and industrial infrastructure. Decreased domestic production then lowers the marginal return on productive activities, and insurgency emerges. The resultant conflict further displaces human, built, and natural capital. It forces the economy into a vicious downward spiral. Our numerical results highlight the importance of governance reform and productivity growth in reducing oil-and-gas-related conflicts, and thus identify potential points of intervention to break the downward spiral.
ISSN:1932-6203
1932-6203
DOI:10.1371/journal.pone.0066706