Oil at risk: Political violence and accelerated carbon extraction in the Middle East and North Africa

• Main Authors: MERRILL, Ryan Knowles, ORLANDO, Anthony W.
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2020
• Subjects: Oil production; Political violence; Hotelling rule; Exhaustible resources; Climate change; Risk-induced extraction; Agribusiness; Agricultural and Resource Economics
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/6700; https://ink.library.smu.edu.sg/context/lkcsb_research/article/7699/viewcontent/Oil_at_risk_2020_av.pdf
• Institution: Singapore Management University

What effect does the threat of expropriation have on resource extraction? Much of the economic literature suggests that uncertainty reduces investment, but the theory of risk-induced extraction suggests the opposite. In this paper, we test this theory in the context of political violence, which poses a real threat of state destabilization and violent expropriation of property rights. Facing this uncertainty, we find that oil producers in the Middle East and North Africa increase oil production in response to political violence. This finding has important negative consequences for the world in terms of climate change and demonstrates a previously untested mechanism through which exhaustible resource supply is flooding the market.