Oil income – blessing or curse?

This chapter takes on the academically most debated issues related to oil and politics, the so-called resource curse. The discussion of the economic aspects of the resource curse starts out with the so-called Dutch Disease, referring to the potential negative economic effects of a sudden inflow of foreign currencies following increased oil exports. The chapter discusses the policy options for governments of oil-exporting countries to avoid the Dutch Disease, in particular the ability to save income from oil exports. The political aspects of the resource curse is discussed with reference to the concept of rentier states, focusing on the political effects when the governments of oil rich states to a large extent can finance themselves by direct income from sales of natural resources. The chapter ends with brief discussions of the resource curse in the three diverse oil-producing countries: Venezuela, Saudi Arabia and Norway.