Fossil Fuels, Economic Rents and International Crises

A-Whale and Coast Guard Cutter Resolute, July 4, 2010 | © Courtesy of John Masson/Deepwater Horizon Response/Flickr.
A-Whale and Coast Guard Cutter Resolute, July 4, 2010 | © Courtesy of John Masson/Deepwater Horizon Response/Flickr.

On April 20, 2016, Zorzeta Bakaki has published an article entitled “Fossil Fuel Rents: Who Initiates International Crises?” in Peace Economics, Peace Science and Public Policy.

A Blog Post by Pablo Markin.


In her econometric paper, Zorzeta Bakaki has focused on the impact of natural resource scarcity on the risk of country-level and international violent and non-violent conflicts, especially in the context of fossil fuel markets. Based on her sample of data from 179 countries for the period between 1980 and 2006, this scholar has inquired into “the incentives for international crisis initiation” (173) in relation to different fossil fuel types and other factors, such as oil rents. Consequently, this scholar has examined economic models of  “opportunity costs associated with assertive behavior of exporters across three market structures: (1) monopoly, (2) oligopoly and (3) free market” (174).

The key premise of this article is that a “state initiates a crisis only if it expects more gains through crises rather than through other means (Bueno de Mesquita 1980; Powell 2006; Reiter 2003; Wagner2000)” (175). Thus, Bakaki has formulated research hypotheses, according to which, countries with low oil rents, high gas rents and high coal rents initiate international crises under oligopolistic, monopolistic and free market conditions respectively (176). Based on her empirical analyses, this researcher has found that “countries with oil rents are statistically significantly associated with crisis initiation” (181).

Furthermore, in relation to gas rents, Bakaki has found that “states having a monopoly are more likely to initiate a crisis, knowing that there is unlikely to be much damage to their fuel revenues” (181). Likewise, this paper suggests that, under free market conditions, “the probability of crisis initiation” (181) rises, since they reduce its possible negative impact on fossil fuel revenues. The empirical results of this author have similarly shown that country-level “military capabilities and military expenses positively affect [the chances of] crisis initiation” (184). This article has also found that, although “democracies seem to be prone to crisis initiation ([in the context of] gas rents) […] [t]he democracy effect is statistically insignificant in the models on oil and coal rents” (186).

By Pablo Markin


Featured Image Credits: A-Whale and Coast Guard Cutter Resolute, July 4, 2010 | © Courtesy of John Masson/Deepwater Horizon Response/Flickr.

Cite this article as: Pablo Markin, "Fossil Fuels, Economic Rents and International Crises," in Open Economics Blog, 14/06/2019, https://oeb.hypotheses.org/1009.

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