Monday, September 30, 2013

Do natural resources matter for interstate and intrastate armed conflict?

Journal of Peace Research: This article reviews the existing theoretical arguments and empirical findings linking renewable and non-renewable natural resources to the onset, intensity, and duration of intrastate as well as interstate armed conflict. Renewable resources are supposedly connected to conflict via scarcity, while non-renewable resources are hypothesized to lead to conflict via resource abundance. Based upon our analysis of these two streams in the literature, it turns out that the empirical support for the resource scarcity argument is rather weak. However, the authors obtain some evidence that resource abundance is likely to be associated with conflict. The article concludes that further research should generate improved data on low-intensity forms of conflict as well as resource scarcity and abundance at subnational and international levels, and use more homogenous empirical designs to analyze these data. Such analyses should pay particular attention to interactive effects and endogeneity issues in the resource–conflict relationship.

Friday, September 27, 2013

Natural resources and institutional development

Journal of Theoretical Politics: Recent work on the resource curse argues that the effect of resource wealth on development outcomes is a conditional one: resource-dependent countries with low-quality institutions are vulnerable to a resource curse, while resource-dependent countries with high-quality institutions are not. But extant models neglect the ways in which the inflow of resource revenue impacts the institutional environment itself. In this paper, I present a formal model to show that where domestic institutions do not limit state leaders’ discretion over policy prior to becoming fiscally reliant on resources, those leaders have little incentive in the wake of resource windfalls to establish institutional mechanisms that limit their discretion. Importantly, this shows that simple calls for domestic institutional reform are unlikely to be effective. Among other things, future prescriptions to mitigate the resource curse must focus on decreasing rulers’ fiscal reliance on resources.

Wednesday, September 25, 2013

The carbon curse: Are fuel rich countries doomed to high CO2 intensities?

Energy Policy: The carbon curse is a new theory, related to but distinct from the resource curse. It states that fossil-fuel rich countries tend to follow more carbon-intensive developmental pathways than [if they were] fossil-fuel poor countries, due to a hitherto unappreciated syndrome of causal mechanisms. First, fuel rich countries emit significant amounts of CO2 in the extraction of fuel and through associated wasteful practices such as gas flaring. Second, easy access to domestic fuel in such countries leads to crowding-out effects for their energy mix and economic structure (for example, abundant oil may displace other fuels from the energy mix and lead to the “Dutch Disease”). Third, fuel abundance weakens the economic incentive to invest in energy efficiency. Fourth, governments in fuel rich countries are under considerable pressure to grant uneconomic fuel consumption subsidies, which further augments the carbon intensity of their economic output. Due to the combined effect of these causal mechanisms, it is genuinely difficult for fuel rich countries to evade carbon-intensive developmental pathways. And yet there are remarkable exceptions like Norway. Such positive outliers indicate that the carbon curse is not destiny when appropriate policies are adopted.

Friday, September 20, 2013

Oil Change International

Oil Change International campaigns to expose the true costs of fossil fuels and facilitate the coming transition towards clean energy. Plenty of interesting info on this website.

Wednesday, September 18, 2013

Libya Goes for Broke

Foreign Policy: The country boasts some of the world's largest proven oil reserves, substantial capabilities for natural gas production, $168 billion in foreign assets and an enviable 2000 km-plus stretch of coast on the Mediterranean. For all these assets, Libya (pop. 6.4 million) also has a relatively small number of mouths to feed. In other parts of the world, the combination of small population and ample natural resources has generally proven a surefire formula for success. Why does Libya fail to follow suit?

Friday, September 13, 2013

Managing the Macroeconomy in an Oil Rich Country: The Case of Ghana

IGC Policy Note: The fiscal and macroeconomic benefits are not guaranteed in the presence of oil revenues. We therefore conclude by making two key recommendations on how the country can maximise the macroeconomic benefits of oil revenues for Ghana...

Thursday, September 12, 2013

How People Perceive Time Influences How They Think About Climate Change

Big Think: For psychologists in the 21st century, the question is not “what is time?” but “how does our perception of time influence judgment and decision making?...

Tuesday, September 10, 2013

Endemic Corruption in Indonesia’s Energy Sector

Time: Indonesia has been stunned and saddened by the arrest of Rudi Rubiandini, chief of the country’s top oil-and-gas regulator, SKK Migas, on corruption charges. In a country plagued with graft, Rubiandini had been seen as a clean and upstanding figure — a respected academic and technocrat who had pledged to fight corruption in Indonesia’s lucrative energy sector.

Rubiandini, who took over SKK Migas in January following a brief stint as Deputy Energy Minister, is accused of taking $700,000 in bribes from an oil-trading company; the sum is a record high among the cases pursued by Indonesia’s Corruption Eradication Commission (KPK). In a late-evening swoop Tuesday, KPK investigators seized stacks of U.S. and Singaporean banknotes and a BMW motorcycle from his home; they also arrested a man who allegedly handed the money and the motorcycle to Rubiandini and an executive of Kernel Oil, a Singapore-based company...

Monday, September 9, 2013

Norway Has More Money Than It Knows What To Do With

Business Insider: The Nordic country faces an embarrassment of riches as it tries to figure out how to spend its huge pile of oil money without damaging the economy in the long run...

Communities destroyed by scramble for Africa

Mail and Guardian: A hearing on the growing race to grab Africa's land was told by people across the continent that they were losing their livelihoods and futures...

Sunday, September 8, 2013

The global implications of falling commodity prices

Project Syndicate: The decade-long commodity-price boom has come to an end, with serious implications for global GDP growth. And, although economic patterns do not reproduce themselves exactly, the end of the upward phase of the commodity super-cycle that the world has experienced since the early 2000’s dims developing countries’ prospects for continued rapid catch-up to advanced-country income levels...

Saturday, September 7, 2013

In Chile's Copper Boom, Miners Spread the Wealth

Bloomberg Businessweek: Spending by miners is so high that for each mining job created, three are generated elsewhere, says Mining Minister... Many of those additional jobs are in retail...  “Miners buy three to four perfumes when they come in, and they go for high-end brands like Carolina Herrera, Hugo Boss, and Paco Rabanne,”... Ditec Automoviles... plans to open its first Porsche showroom in Antofagasta in the heart of mining country within 12 months... Supermarkets in Chile’s northern towns now sell caviar and spider crab...

Petroleum to the People

Foreign Affairs: Africa’s Coming Resource Curse—and How to Avoid It... In October 2011, the U.S. Department of Justice filed a motion to seize a palatial cliff-top home in Malibu, California. The 16-acre property towers over its neighbors, with a palm-lined driveway leading to a plaster-and-tile mansion. Situated in the heart of one of the United States’ most expensive neighborhoods, the $30 million estate includes a swimming pool, a tennis court, and a four-hole golf course. In its complaint, the Justice Department also set its sights on high-performance speedboats worth $2 million, over two dozen cars (including a $2 million Maserati and eight Ferraris), and $3.2 million in Michael Jackson memorabilia -- in total, assets equaling approximately $71 million. What made these extravagant possessions all the more remarkable was that they belonged to a government worker from a small African country who was making an official salary of about $80,000 a year: Teodoro Nguema Obiang Mangue, the oldest son of and heir apparent to Teodoro Obiang Nguema Mbasogo, the longtime president of Equatorial Guinea...

Friday, September 6, 2013

Coping with high oil prices

Econbrowser: We've been seeing oil over $100 a barrel and gasoline above $3.40 a gallon for much of the last 3 years. Those prices would have shocked many Americans a few years ago, but have now become the new normal. What has changed and what hasn't as a result?...

Governing the Resource Curse: Advancing Transparency

Council on Foreign Relations: Ahead of the G8 summit this June, economist Paul Collier remarked that “instead of preaching to poor countries or promising to double aid, which we never did anyway, the idea now is… to put [our] own house in order, in ways that are good for us and also good for Africa.” Prefacing the summit’s strong focus on transparency, Collier’s statement touches on a recent series of international actions that shift the approach to solving the problem of corruption in the extractives industry. Where countries with natural resource abundance have often been scrutinized for failure to turn their endowments into sustained wealth for their populations, the onus is now on the companies that partner with these states to extract natural resources, to instigate change. Consequently, a new paradigm is emerging wherein the extractives industry is increasingly accountable for its financial transactions—which, in remaining largely ungoverned, have contributed significantly to the “resource curse.” At the heart of this shift, transparency is taking center stage...

Thursday, September 5, 2013

Five myths about fracking

Matt Ridley: Shale gas does not cause earthquakes, pollute water or use toxic chemicals. Wind turbines do far more damage...

Wednesday, September 4, 2013

Worried wells

The Economist: OVER the past month the price of Brent crude oil has risen by five dollars to $115 a barrel. The prospect of Western military intervention in Syria is one reason for the bump in price... military action could have nasty spillover effects elsewhere in the Middle East... could also foster violent anti-Western sentiment in Egypt, home of the Suez Canal, which carries 7% of the seaborne trade in oil... A combination of strikes and sabotage has hurt Nigerian, Iraqi and Libyan oil production. And the amount of “spare capacity” in oil output—a gauge of future price movements—is at its lowest level since 2008. That will keep oil floating to the surface...

Norway gives $4.9 milion to AfDB to help break ‘resource curse’

Reuters: Norway has agreed to give $4.9 million to the African Development Bank (AfDB) to help African governments negotiate "fair and balanced" deals with oil, gas and mining companies operating on the continent, the bank said on Monday.

The money will go to the African Legal Support Facility, a body set up by the AfDB to help African governments hammer out complex commercial deals.

“Norway is seeking to help turn Africa’s ‘resource curse’ into a ‘resource blessing’ by supporting the negotiation of better contract terms,” Norway’s minister of international development, Heikki Eidsvoll Holmas, said in a statement...

Libya's Oil Industry Is in Trouble

Businessweek: One of the most amazing things about the Libyan Revolution was just how quickly the country’s oil industry rebounded from the chaos and violence of 2011. After bottoming out at only 45,000 barrels a day in August that year after having fallen 97 percent since the previous January, Libya’s oil production was back near full capacity—1.6 million barrels a day, by last summer. That’s a huge success by any measure.
Now, nearly two years after the death of Muammar Qaddafi, Libya is backsliding into chaos. Striking workers angry about government corruption and low wages have attacked the engine of the country’s fragile economy: the export terminals and oil fields, many of them state-run, that hold Africa’s largest known crude reserves. To press their demands, roving militias have begun seizing and shutting down the terminals, leading to a precipitous drop in Libya’s precious oil exports, which account for practically all of the country’s gross domestic product. For more than two weeks, Libya’s exports have basically flatlined as all but one terminal have been shut-in...

Tuesday, September 3, 2013

Optimal Monetary Responses to Oil Discoveries

OxCarre WP by Sam Wills: Monetary policy can play an important role in managing oil discoveries. Ideally
governments will use fiscal policy to smooth consumption of oil income. In practice this often does not happen, as governments delay spending until oil revenues are received. This induces changes in the economy, both at discovery and when spending begins. In this paper we consider how monetary policy should respond. The paper makes three contributions. The first is to show that an oil discovery causes the real exchange rate to appreciate twice: when forward-looking households and then the government increase their consumption. This can cause a recession under standard monetary regimes, as firms anticipate the second appreciation. The second contribution is to micro-found the objective of monetary policy. The central bank should stabilise inflation, the output gap and the fiscal gap. It will also try to appreciate the non-oil terms of trade, to exploit the asymmetry from owning oil wealth. The third is to derive a closed form for optimal monetary policy, which will respond in advance to expected changes in government demand. This will delay the second real appreciation until the government can take up the slack left by private demand. Optimal policy significantly improves welfare relative to standard monetary regimes, and is well approximated by a simple Taylor rule that responds to expected changes in the natural level of output.

Gas is politics and politics is gas

WSJ Moneybeat: From the plains of Alberta to the deserts of Sudan, oil is politics and politics is oil. The same could now be said for gas. Look at this Reuters story—Saudi Arabia has offered Russia incentives including a major arms deal and a pledge not to challenge Russian gas sales, if Moscow withdraws support for the Syrian government...

Monday, September 2, 2013

Norway Oil Riches Up for Grabs as Anti-Tax Group Set to Win

Bloomberg: Norway’s Sept. 9 election is set to open up a debate on how much of the nation’s oil wealth can be funneled straight into Scandinavia’s richest economy.

The Progress Party, poised to enter government for the first time since being founded in 1973, is campaigning on a platform to scrap Norway’s 4 percent spending limit on oil revenue. The rule, which was pushed through by Prime Minister Jens Stoltenberg’s Labor Party early last decade to prevent overheating, is backed by all other groups in parliament...

Why does natural resource abundance not always lead to better outcomes?

WP from the Oxford Institute for Energy Studies: Is the failure of natural resource abundance to achieve better economic outcomes due to limited financial development or fi scal policy short-termism? I answer this
question in a precautionary savings model where both resource revenues and asset returns are uncertain. Calibrating for Colombia, I find that under policy impatience, welfare costs are large, net assets are insufi cient and net discretionary expenditures are too sensitive to resource revenues. If fi nancial markets are underdeveloped, we can generate welfare costs of the same magnitude but not also explain why there are insu cient net e ective assets, nor the heightened sensitivity to revenues.

Sunday, September 1, 2013

The Supply of Environmentalism

Ed Glaeser: Long before economics turned to psychology, environmentalists were nudging and framing and pushing their cause like highly gifted amateur psychologists. Their interventions seem to have changed behavior by altering beliefs, norms and preferences, but because psychological interventions are often coarse, inadvertent, offsetting side effects occur. After discussing the interplay between environmental preference-making and economics, I turn to three areas where strong, simple views have spread—electric cars, recycling and local conservation efforts. In all three areas, environmental rules of thumb can lead to significant, adverse environmental side effects. Local environmentalism, for example, may increase carbon emissions by pushing development from low emission areas, like coastal California, to high emissions areas elsewhere. I end by discussing how economic analysis of the political market for ideas can make sense of the remarkable disparity of views on global warming.