Refineries, Pipelines and Petroleum Fields - The Impact of Oil on Conflict Around the World

Axel Dreher, Maximilian Herrmann and Jingke Pan

No 21648, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We study how global oil price shocks affect the spatial distribution of violent conflict. Combining monthly georeferenced data on oil infrastructure with conflict events worldwide over 1989-2021, we exploit exogenous variation in world crude oil prices within countries using grid-cell and country*month fixed effects. Oil price increases raise organized conflict in oil-bearing cells but reduce it in nearby non-oil areas, indicating a spatial reallocation of territorial violence toward economically valuable locations rather than a uniform increase in conflict. By contrast, lower-intensity unrest spreads across neighboring cells, consistent with diffuse grievance and mobilization channels. The effect is strongest for petroleum fields and driven by state-based conflict, consistent with intensified contestation over oil rents, while downstream infrastructure is associated with protests and localized violence. The magnitude of the response varies with ethnic exclusion, institutions, geography, and ownership, pointing to rent-contestation mechanisms shaped by local conditions.

JEL-codes: F35 F59 H73 H77 O19 P33 (search for similar items in EconPapers)
Date: 2026-06
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