I started analysing commodity markets and energy policies in the early 2000-s when the circumstances were vastly different from today’s situation. Back then the entire global club of petro-states was – as we used to say – “drunk on oil”. Just before the financial crisis the price of crude reached an all time record level of $140 per barrel. Many were convinced that prices would reach $200 per barrel, and from there it was no great leap to $300 – some seriously considered such a possibility!
The events I initially observed in one petro-state, Russia, and then globally – when I joined BP and dealt with various oil economies – first provoked my curiosity and then fascination with resource economics and oil politics. In 2013, intrigued by the phenomenon of petro-states, I pulled together a team of researchers and created a think tank to research resource economics. In my publications I argued that it is the quality of institutions which essentially determines whether natural resource abundance is a blessing or a curse. I described how poor institutions and corrupt elites can corrode the very fabric of an oil economy – all of which seemed of little relevance during the “oil high”.
All of this started to change in July 2014 when there began the most significant decline in oil prices since the 1980s. The “bear market” of 2014-2016 brought about some profound changes and challenges to the status quo: the democratic change of government in Nigeria and, later, Malaysia; mass anti-corruption protests in Brazil followed by the impeachment of Dilma Rousseff; the plan to diversify away from oil and build Neom, a solar-powered smart city in Saudi Arabia – just to name a few. Moreover, the nearer horizon of peak oil demand and the spread of electric vehicles and renewable energy are undermining the economic foundations of many oil-dependent states in the longer term.
Essentially, a lot of my research (including the report “Curse or Blessing? How Institutions Determine Success in Resource-Rich Economies” which summarised my observations) addresses the following question: what brought about the ascent, zenith and consequent stagnation of the petro-state model that we are seeing today? My experience convinced me that analysing recent developments through the prism of previous history is crucial for understanding where the petro-state model is headed and what might replace it. I very much hope that my research will be a helpful contribution to this understanding.