Oil Price Shocks and Conflict Escalation: Onshore vs. Offshore

41 Pages Posted: 22 Sep 2021

See all articles by Jørgen Juel Andersen

Jørgen Juel Andersen

Norwegian School of Management (BI)

Frode Martin Nordvik

Kristiania University College

Andrea Tesei

Queen Mary University of London - School of Economics and Finance

Date Written: August 2021

Abstract

We reconsider the relationship between oil and conflict, focusing on the location of oil resources. In a panel of 132 countries over the period 1962-2009, we show that oil windfalls escalate conflict in onshore-rich countries, while they de-escalate conflict in offshore-rich countries. We use a model to illustrate how these opposite effects can be explained by a fighting capacity mechanism, whereby the government can use offshore oil income to increase its fighting capacity, while onshore oil may be looted by oppositional groups to finance a rebellion. We provide empirical evidence supporting this interpretation: we find that oil price windfalls increase both the number and strength of active rebel groups in onshore-rich countries, while they strengthen the government in offshore-rich ones.

Keywords: conflict, Natural resources

JEL Classification: D74, O13, Q34, Q35

Suggested Citation

Andersen, Jørgen Juel and Nordvik, Frode Martin and Tesei, Andrea, Oil Price Shocks and Conflict Escalation: Onshore vs. Offshore (August 2021). CEPR Discussion Paper No. DP16454, Available at SSRN: https://ssrn.com/abstract=3928751

Jørgen Juel Andersen (Contact Author)

Norwegian School of Management (BI) ( email )

P.O. Box 580
NO - 1302 Sandvika
Norway

Frode Martin Nordvik

Kristiania University College ( email )

Prinsens gate 7-9
Oslo, 0152
Norway

Andrea Tesei

Queen Mary University of London - School of Economics and Finance ( email )

Lincoln's Inn Fields
Mile End Rd.
London, E1 4NS
United Kingdom

HOME PAGE: http://andreatesei.com

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