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Oil at risk: Political violence and accelerated carbon extraction in the Middle East and North Africa

Ryan K. Merrill and Anthony W. Orlando

Energy Economics, 2020, vol. 92, issue C

Abstract: What effect does the threat of expropriation have on resource extraction? Much of the economic literature suggests that uncertainty reduces investment, but the theory of risk-induced extraction suggests the opposite. In this paper, we test this theory in the context of political violence, which poses a real threat of state destabilization and violent expropriation of property rights. Facing this uncertainty, we find that oil producers in the Middle East and North Africa increase oil production in response to political violence. This finding has important negative consequences for the world in terms of climate change and demonstrates a previously untested mechanism through which exhaustible resource supply is flooding the market.

Keywords: Oil production; Political violence; Hotelling rule; Exhaustible resources; Climate change; Risk-induced extraction (search for similar items in EconPapers)
JEL-codes: G31 G32 Q31 Q34 Q35 Q41 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.eneco.2020.104935

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Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

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