Peter Kanacheev: Debunking the Myth of the Resource Curse
This summary was written by Vera Kichanova, President.
On Tuesday 21 February 2017, Peter Kaznacheev, Director of the Centre for Resource Economics, addressed the Oxford Hayek Society in St. Anthony's College on the subject of 'Debunking the Myth of the Resource Curse'.
Peter's insightful talk discussed the future of petrostates, explaining how oil-dependent economies adapt - or fail to adapt - to the new realities of cheaper oil.
He discussed what might have caused the recent fall in oil prices. For decades, the price of an oil barrel has been extremely sensitive to military conflicts in the Middle East. However, the expansion of ISIS in the region in 2014 did not increase oil prices.
Instead, we have witnessed one of the most dramatic drops in oil prices ever.
According to Peter, we have entered the era of the 'Oil Zen' and the innovation boom in the industry, especially the shale revolution in the US, is in many ways responsible for this.
For the first time since the 1970s, in 2014 American crude oil production surpassed that of Russia and Saudi Arabia. The era of inflated prices, which started in the 1950s with a wave of nationalisations across oil-producing countries, is probably over. The shale revolution has shifted leadership in the industry from corrupt authoritarian regimes to countries with stronger democratic institutions and more favourable business climates.
According to Peter, anti-corruption protests in resource-rich economies show that the 'resource nationalism' model is being seriously questioned by the people of these countries. The Petrobras corruption scandal triggered mass civil protests against Brazil’s President, Dilma Rousseff, and consequently lead to her impeachment. Corruption scandals have occurred a number of oil economies in recent years, from Nigeria to Malaysia and from Venezuela to Russia.
The 'resource curse' hypothesis, Peter claimed, is supported not so much by scholars as by the leaders of resource-rich countries who prefer to blame economic stagnation on oil abundance. However, oil-exporting countries, such as Canada, Australia, Norway and Malaysia, demonstrate that it is possible to build a prosperous and innovative economy with a significant share of income from the sale of hydrocarbons. Evidence is at odds with the idea that mineral-exporting countries are doomed to rent-seeking and corruption.
Every attendee took a copy of the books Peace, Love and Liberty and Why Liberty, both collections of essays written by distinguished scholars, entrepreneurs and activists and edited by Dr. Tom Palmer, a former President of the Oxford Hayek Society and current Senior Fellow at the Cato Institute.
Peter Kaznacheev is an energy economist, researcher and columnist. Alongside his work at the Centre for Resource Economics, he also runs a consulting firm helping businesses to adapt to the new era of cheaper oil. Previously, he worked as a business developer at BP, and before that as a senior advisor to the Russian presidential administration. Peter is a member of the Mont Pelerin Society, an international network of classical liberal scholars founded by F.A. Hayek in 1947. Peter's most recent policy paper, Curse or Blessing? How Institutions Determine Success in Resource-Rich Economies, was published by the Cato Institute.