A petrostate or oil state is a country whose economy is heavily dependent on the extraction and export of oil or natural gas. The presence alone of large oil and gas industries does not define a petrostate: major oil producers that also have diversified economies are not classified as petrostates due to their ability to generate income from various industries and sectors beyond the oil industry.[1] Petrostates also have highly concentrated political and economic power, resting in the hands of an elite, as well as unaccountable political institutions which are susceptible to corruption.[2]
Various countries have been identified as current or former petrostates:
Petrostates rely on oil as a primary source of income, which can make their economies vulnerable to fluctuations in oil prices. When oil prices are high, they tend to thrive, but they can struggle during periods of low oil prices.
Petrostates are typified by weak economies, where products are more frequently imported than domestically produced. Diversification can successfully occur in limited circumstances, such as Mexico becoming part of the North American Free Trade Agreement, or Dubai leveraging its location to become a hub of commerce and tourism. Most petrostates do not attempt economic diversification, instead seeking economic domination through large, state-owned oil companies.[1]
In some petrostates, leaders and governments may become more authoritarian as they accumulate significant wealth and power through the control of the oil sector. They may use these resources to maintain political control, suppress opposition, and stifle democratic institutions. For example, Steven Fish identifies oil wealth as one of the major reasons for Russia's failed democratization. He explains that revenue from oil exports fueled corruption, and corruption, in turn, hampered Russia's political liberalization. Furthermore, he notes that Britain's and Norway's resource wealth did not lead to authoritarianism because "sturdy democratic regimes" were already in place.[8] Similarly, Michael Ross argues that “the case of Russia since 1998 illustrates how oil revenues can endanger a weak democracy by boosting the popularity of an elected incumbent, who gradually removes checks and balances on their own authority”.[9]
Petrostates run by autocrats are also called petro-dictatorships.[10]
At the same time, in many petrostates, the government invest in social welfare programs, including healthcare, education, and subsidies for essential goods. For example, Kuwait, Saudi Arabia, United Arab Emirates, and Qatar have invested in education, healthcare, and public amenities to improve the quality of life for their citizens.[11][12]
|
See also: Dutch disease |
The reliance on oil and natural gas may preclude the development of other industries, known as Dutch disease. Light industries, including textiles and clothing, are key factors that drive women to participate in the workforce. Petrostates thus often have lower rates of female workers, which can impede women's access to social and political freedoms.[10]
|
See also: Resource curse |
Global energy prices can cause turbulent and unpredictable swings in a petrostate's economy. Undiversified reliance on oil and gas industries can cause political and economic crises when the price of oil drops. Over-investment in these industries at the expense of other sectors, such as manufacturing and agriculture, can hurt economic growth and competitiveness. Petrostates can suffer from the resource curse, meaning that their abundance of natural resources can have detrimental impacts on other parts of the economy, as well as negative social and political impacts.[2][13]
The extraction and production of oil can have significant environmental and ecological impacts, including pollution, habitat destruction, and greenhouse gas emissions. This can lead to environmental concerns and criticism, both domestically and internationally.
Recent studies challenge the assumption that the transition to sustainable energy will lead to the decline of petrostates, suggesting that their future depends on production costs and social factors.[14][15] Furthermore, the low-carbon transition might provide new export opportunities for petrostates as energy-intensive sectors in developed countries decrease, potentially leading some to further specialize in high-carbon segments, particularly in the Middle East.[14]
The presence of a booming oil industry influences a nation's cultural landscape. It may manifest in conspicuous consumption, urban development, and the emergence of specific cultural symbols associated with wealth and status.
The petrostate narrative often becomes intertwined with the national identity.[16][17][18][19][20] The story of an oil-rich nation can influence collective memory and national pride. Cultural narratives might emphasize self-reliance, economic strength, or the role of oil in nation-building.