Factors And Challenges In Developing Countries Under The Resource Curse

Many oil-based countries failed to boost their economy development despite the long period of high oil prices going from 2002 to 2014. 12 years of inflated prices were marked by a more or less stagnated economy. While possessing large oil and shale gas resources for decades, many oil-based countries were and are still suffering from an economic collapse. This situation was long called the resource curse. The combination of oil price volatility, the pressure on agricultural and manufacturing sectors, the development of inequalities, and the disincentive effects of tax and weak institutions all result in a failure of policies and a growth collapse. After July 2014, the global market changed after the rapid and most uncommon decrease in oil prices since the 1980s. The demand for oil crumpled around the world, but mainly in the US where oil production increased to the point of making it in competition with the biggest oil producers; both Saudi Arabia and Russia. The US changed its energy mix making it more dependable on domestic gas, and shale gas production more specifically. With all these changes, many governments are catching up and the experts have shifted their attention to the role of institutions. The institutional component is now a lead to government development success. Even though shale gas is being criticized for its environmental and technical issues, it raised the attention back to the " institution-economy connection " , which is claimed to work better than the " oil-economy development ". By analyzing the case studies of some oil-based countries, this paper concludes that the identification of a natural resource as a curse or a blessing will highly depend on the quality of institution itself.