The document summarizes an article arguing that oil wealth often causes economic and political instability in countries. It discusses how the "oil curse" leads to issues like debt, mismanaged revenues, and economic dependence on oil. This can then fuel conflicts through unrest and instability. As an example, it outlines how Venezuela experienced huge economic growth from oil but then deterioration as revenues declined and were poorly managed under Chavez. It evaluates different approaches for addressing conflicts related to oil wealth, such as diplomacy, sanctions, or military intervention, but notes challenges with each.

1. Juan Pablo Poch
Oil Conflict: The Political Dilemma
In the article Blood Barrels: Why Oil Wealth Fuels Conflict, Michael L. Ross claims that
“oil wealth often wreaks havoc to a country’s economy and politics”, and fuels or is intricately
involved in the majority of the world’s civil wars. The oil curse, as he calls it, begins with a
country’s massive economic growth after the discovery of oil deposits, followed by the local
government incurring in copious debts, squandering oil revenues, and, in many occasions,
suffering from the Dutch Disease, which creates absolute economic dependability on petroleum.
Consequently, this curse paves the way towards armed conflict, because oil wealth leads to
economic unrest that leads to further political instability, often helps to support insurgencies, and
encourages separatism of enclosed economic enclaves (Ross).
Ross makes a concise yet accurate assessment of the main political disadvantages
affronted by states with emerging primary activities around oil, especially by analyzing the
relationship between economic instability and political unrest. Economic instability is perhaps
the category that engulfs most states with petroleum-depending economies, including economic
giants like Russia. The downfall of these producers is particularly evident given the current and
increasing downfall of oil world prices of more than 50% in the last six months. The increase in
domestic supply of oil in North America that rendered the United States less dependable on
petroleum imports undermined the influence of exporting countries, particularly the leverage that
the once powerful tycoons of the OPEC possessed over international trade. These countries can
no longer engage in an embargo like in the 1973, for they are even struggling with enormous
deficits to meet their citizens’ basic needs.

2. The case of Venezuela portrays this foredoomed story to the letter. During the late 20th
century, prospections and excavations yielded massive oil reserves that rocketed the Venezuelan
economy to a protagonist level in the world. Following the initiative of creating one of the most
influential economic coalitions in the world (OPEC), Venezuela’s oil revenues multiplied. Even
through global recessions like the one during the late 1990s, under the presidency of Hugo
Chavez, the Venezuelan economy recovered in the next decade and once more ignited the
revenue-making machine. However, in the coming years, the overwhelming wealth was
disproportionately squandered in unnecessary expenditures, like the billionaire purchase of arms
(US $4.3 billion between 2005-2007) – an attempt to provoke the US – and the financing of
populist campaigns and propaganda, to the point that the Venezuelan society was hanging from
the thread of Chavez’s charismatic leadership from falling into devastating political unrest.
Chavez’s death in 2013 left an economy standing on the fragile base of oil and an enraged
Venezuelan nation, which had seen its society deteriorate with increasing famine and crime,
along with a deeply rooted corruption that just keeps draining whatever money remains. In the
last quarter of 2014, this situation kept worsening, for, with the plummeting world oil prices, it
turned out to be cheaper to buy a gallon of gasoline than a roll of toilet paper. The level of social
degradation in Venezuela has reached a stage where any inciting incident can drive the weakened
state into an armed conflict and total anarchy.
To problems like the one illustrated above, Ross suggests several solutions or at least
ameliorating measures that the international community can take to manage these crises. Within
the range of possibilities, these plans can be classified by their political/military, economic or
diplomatic nature. Among the former are the deployment of peacekeeping forces or even a more
direct military intervention by another country. Even though these can be effective in the short

3. term to combat insurgencies, in the long term such plans would hardly strengthen the local state,
as it would legitimize the actions of an external actor in the state’s sovereign affairs. Also,
reaching an international consensus on a move as bold as approving an interstate war would
surely confront a robust opposition, given the precedent of the futile US intervention in Iraq.
Second in line is economic sanctions imposed by the UN to trouble-making states. For
this kind of measures the fact that oil is the world’s most valuable commodity, “serves a
diversity of purposes, which include transportation, heating, electricity, and industrial
applications, and is an input into over two thousand end products” cannot be ignored (O’Rourke
and Connolly). Even with declining prices, the weight of oil in the international market is so
immense, that a sanction big enough to paralyze a rogue state would be proportionately coercive
to the global economy. Not to mention the subsequent damage suffered by individuals, as the
International Labor Organization calculates that the global oil industry directly employs more
than 2 million workers, and also estimates that one job in the oil production or refining sector
generates up to four additional jobs in related industries (O’Rourke and Connolly).
Although it gambles on the power of persuasion, diplomacy seems as the least costly
alternative to solve oil-related conflicts, as it involves the lowest risk due to coercive military or
economic intervention. Following the salesmanship philosophy that the customer is always right,
the only actors that can actually exert effective diplomatic pressure on oil-exporting weak states
are their biggest buyers and investors. As Ross mentioned, the clientele can demand oil-
supplying countries more transparency and better allocation of their revenues in a more equitable
way – through contracts or even just persuasion --; moreover, more developed countries can help
less developed ones to manage their resources or even that their payments are made through
infrastructure concessions or financing of social programs. However, the downside of this

4. alternative is the extent of the effectiveness of persuasion, as many oil-exporting countries can
just switch to customers who do not impose such conditions – some multinational companies –,
or even afford to enter into a recession while oil demand increases and prices are pumped back to
a more profitable margin. In the end, as long as the world depends on this commodity, the
incentives to abolish the political instability in several countries around the world generated by
oil and its subsequent wealth will fall short of our necessity for a reliable energy source.
Bibliography:
O'Rourke, Dara, and Sarah Connoly. "Just Oil? The Social Distribution of Environmental and
Social Impacts of Oil Production and Consumption." Annual Review of Environment and
Resources, 28(1). Annual Reviews, 1 Nov. 2003. Web. 5 Feb. 2015.
Ross, Michael L. "Blood Barrels." Current 503 (2008): 35-37. Academic Search Complete. Web.
5 Feb. 2015.
Romero, Simon. "Venezuela Spending on Arms Soars to World’s Top Ranks." The New York
Times. The New York Times, 24 Feb. 2007. Web. 12 Feb. 2015.
US. Energy Information Administration, Crude Oil Prices: West Texas Intermediate (WTI) -
Cushing, Oklahoma [DCOILWTICO], retrieved from FRED, Federal Reserve Bank of St. Louis,
February 11, 2015.