Backgrounder
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See Also
Algeria, Nigeria,Economic Development
Academic Modules
Academic Module: Nigeria: Elections and Continuing Challenges
The Pernicious Effects of Oil
Author: | Esther Pan |
October 10, 2005
* Introduction
* The Cost of Corruption
* The "Oil Curse"
* Signs of Progress
Introduction
Given the tight supply and surging demand of the world oil market, small countries that produce oil can have a major impact on global markets. This is in contrast to many previous oil shocks, when international cartels like the Organization of Petroleum Exporting Countries (OPEC) effectively controlled world oil supply. As a result, the impact of corruption and mismanagement in countries like Angola, Chad, and Nigeria-which can lead to unrest and force halts to production-are magnified on a global scale. For example, ethnic strife in the southern Nigerian town of Warri in March 2003 shut down 40 percent of Nigeria's oil production for several weeks. "When the market's as tight as it is now, every barrel of export counts," says Richard Karp of the American Petroleum Institute, a trade organization. "Community strife or local unrest" in small countries can raise oil prices around the world, he says.
The Cost of Corruption
Exacerbating the problem in many of these countries is entrenched graft. Corruption "makes it very difficult to create governments that are accountable to people in their own countries, and hurts efforts in those countries to build sustainable development," says Edward Morse, former deputy assistant secretary of state for international...