Oil Discoveries, Shifting Power, and Civil Conflict

Abstract

Can the discovery of petroleum resources increase the risk of civil conflict even before their exploitation? We argue that it can, but only in poorer states where oil revenues threaten to alter the balance of power between regimes and their opponents, rendering bargains in the present obsolete in the future. We develop our claims via a game-theoretic model of bargaining between a government and a rebel group, where decisions over war and peace occur in the shadow of increasing oil wealth that both increases national wealth and shifts relative power in the government's favor. To test the model's main hypothesis, we leverage data on newly discovered oil deposits as an indicator of the state's expected future power resources. Our argument has important implications for the literature on credible commitments, power shifts, and violent conflict.