SARAH PECK, SARAH CHAYES
Paper September 30, 2015
http://carnegieendowment.org/files/CP_250_Peck_Chayes_Oil_Curse_Final.pdf
The political and economic dysfunction known as the “oil curse” is a complex, structural phenomenon, caused largely by poor management or investment of oil revenues by the governments of oil-producing countries.
The political and economic dysfunction known as the “oil curse” is a complex, structural phenomenon, caused largely by poor management or investment of oil revenues by the governments of oil-producing countries. Because this syndrome is taking an increasing toll on oil operations, the oil industry has a strong economic incentive to take affirmative steps, collectively, to mitigate it. And the industry is uniquely positioned to do so.
Instability Hurts the Oil Industry, Its Shareholders, and Other Stakeholders
The capital cost of developing petroleum projects has increased 300 percent since 2003, according to industry analysts. Waste, inefficiency, and delays associated with operations in unstable environments are major drivers of these increasing costs.
These higher costs are, in the end, largely passed on to the host country governments, but they also result in lower profits accruing to the project or oil company shareholders.
The oil industry’s business plans tend not to accurately reflect these aggregated costs, nor to recognize the upsides possible if oil curse symptoms—Dutch Disease, acute corruption, and insecurity—were better mitigated.
The largest private oil companies, which are increasingly competing with national oil companies and non-oil companies, face the most restrictions on their operations. As a result, the “majors” have an added incentive to persuade the industry to adopt practices that promote stability, in order to level the playing field and prevent a race to the bottom that could further fuel conflict.
Read more at: http://carnegieendowment.org/2015/09/30/oil-curse-remedial-role-for-oil-industry/iibp
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