8 January 2021

The Double-Edged Sword of Oil, Energy and Mining in International Politics


Despite concerns over the environmental impact of industrial mining and the contribution that fossil fuels make to global warming, resource extraction continues to be a major source of revenue for both developing countries and wealthier nations alike. In fact, the amount of resources being pulled from the earth has tripled since 1970, though the global population has only doubled in that time.

Despite global efforts to reduce carbon emissions as part of climate change diplomacy, fossil fuels remain among the most prized extractives, for a simple reason: Global demand combined with the wealth they generate have historically given some countries, including members of the Organization of the Petroleum Exporting Countries, outsized global influence.

The lucrative contracts associated with the extractive sector help to explain why resource extraction remains central to many developing countries’ strategy to grow their economies. But the windfalls don’t come without risks, most prominent among them being the “resource curse” that can plague countries that fail to diversify their economies to generate alternate sources of revenue. Corruption can also thrive, especially when government institutions are weak. When the wealth generated from resource extraction isn’t fairly distributed, it can entrench a permanent elite, as in Saudi Arabia, or fuel persistent conflicts, as in the Democratic Republic of Congo. And the environmental damage caused by the extractive industries has decimated local communities and driven social protest movements around the world.

The environmental impact of fossil fuels, particularly with regard to climate change, is driving some changes, in particular a push to develop renewable energy sources, such as wind and solar. But the transition to renewable energy sources is slow to develop, even as its long-term financial viability remains uncertain.

WPR has covered a broad range of issues regarding energy and resource extraction, and continues to examine key questions about future developments. Will renewable energy sources eventually overtake fossil fuels? Or, as countries begin to transition away from more heavily criticized energy sources, like coal, will they replace them with other fossil fuels, like natural gas? Will the coronavirus have a long-term impact on global oil and commodities markets? Below are some of the highlights of WPR’s coverage.

The COVID-19 pandemic is the single biggest demand shock to global energy markets since World War II. Can major oil companies reinvent themselves fast enough to survive, or even thrive, in the new economy? Or will they suffer the fate of Kodak, which stuck with outdated analog film until it was too late?

Oil and OPEC

Though OPEC still retains significant influence, its power is waning. The growth of the United States as an oil-exporting country and the rise of renewable energy have chipped away at its control over the energy market. And now the coronavirus pandemic has flattened demand and clouded the oil sector’s already uncertain future.

How American energy oil and gas producers can survive the coronavirus pandemic, in Why U.S. Shale Gas Could Emerge From the Pandemic Stronger Than Ever
What OPEC got right in its response to the coronavirus pandemic, in How OPEC Shook Off a Historic Crash to Successfully Stabilize Oil Markets
How the economic impact of the coronavirus pandemic will affect global oil markets, in The Coronavirus Pandemic Has Changed Oil Markets Forever
Why OPEC might not survive the coronavirus pandemic, in How COVID-19’s Economic Crisis Could Slowly Break Up OPEC

The Human and Environmental Costs

The wealth produced by the extractive industries comes at great cost, both to local communities and the environment. Despite initiatives to boost transparency, involve affected communities in planning and minimize environmental impact, mining projects continue to drive social conflict and cause serious injustices.

How Russia is drilling itself into an environmental hole in the Arctic, in Russia’s Drilling in the Arctic Is a Threat to the World—and to Itself
Why indigenous women in Canada are protesting a major oil pipeline project, in In Canada, Infrastructure Projects Are Endangering Indigenous Women and Children
Why mining is fueling social and political tensions in Peru, in As Anti-Mining Protests Escalate, Peru’s Vizcarra Sides With Mining Companies

Why clean energy could be a casualty of Andres Manuel Lopez Obrador’s energy nationalism, in How AMLO Is Undermining Mexico’s Clean Energy Goals

Resource-Based Development

Many developing countries see resource extraction as a path to growing the economy and improving livelihoods. But experts argue that extraction must be part of a broader plan for how and where to invest resources, bolstered by transparent reporting and governance systems, if it is to be an effective development strategy.

Why other oil-dependent Gulf states are keeping a close eye on Oman’s experiment with an income tax, in Will Oman’s New Income Tax Be the Start of a Political Sea Change in the Gulf?
What Guyana’s post-election political crisis means for its oil development plans, in A Political Crisis Threatens to Derail Guyana’s Oil Boom
Why redistribution of profits from natural resource extraction could be key to solidifying peace in the Central African Republic, in The Central African Republic’s New Peace Deal Is a Small Step in the Right Direction
Why Congo’s new mining code could create more problems than it solves, in Congo’s New Mining Code Opens the Door to Litigation and More Corruption

Infrastructure and the Global Energy Market

In addition to generating lucrative business deals, the global energy market also shapes international diplomacy. Oil and gas pipelines serve as infrastructure physically joining participating countries, while nuclear energy deals can create industrial and scientific partnerships that span a generation. Meanwhile, competition for markets can also fuel strategic competition and conflict.

How competition over offshore gas fields is heating up tensions in the Eastern Mediterranean, in Will Either Macron or Erdogan Back Down in the Eastern Mediterranean?
How energy ties are driving Russia and China closer, in How a Huge New Gas Pipeline Boosts Russia’s Strategic Entente With China
What U.S. President Donald Trump gets wrong about international energy markets, in Trump’s Boasts of an Economic ‘Boom’ Are Misplaced and Misguided
How U.S. sanctions on Venezuela’s oil exports have sent Cuba’s economy reeling, in An Energy Crisis Is Putting Cuba’s Post-Castro Leadership to Its First Test
The Resource Curse

Resource extraction can go from a blessing to a curse when it fuels corruption or entrenches an elite, robbing citizens of the financial benefits while causing environmental damage. Countries that fail to diversify their revenue sources also risk an economic collapse and social unrest when the resource becomes scarce or global prices drop.

Why Guyana’s pending oil revenues might end up in the hands of a patronage network, in Guyana’s Pending Oil Boom—Or Bust
On Mongolia’s desperate need to diversify its economy beyond mining revenues, in A Debilitating Corruption Scandal Threatens More Damage to Mongolia’s Economy
Illegal and Informal Mining

Globally, illegal mining has become a major social and environmental concern. In the Amazon, researchers describe illegal mining for gold as an “epidemic,” encroaching on indigenous communities and destroying vast swathes of the rainforest. The efforts are often funded by organized crime or major industries, who recruit local workers but do not offer them the training or protection formal mining industries do.

Why Bolivia’s government is struggling to rein in gold mining, in Gold Fever Grips Bolivia, but at What Cost?
What’s driving Zimbabwe’s informal gold mining sector, in A Fatal Accident in Zimbabwe Reveals the Costs of Informal Gold Mining
Why Peru, desperate to prevent illegal mining, appears destined to fail, in Peru’s Militarized Response to Illegal Mining Isn’t Enough to Protect the Amazon

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