British oil giant BP Plc released its state of the world energy report today.

Among the fascinating insights in the report is the rapid rise of American oil production.

For the first time since 1974, oil production by businesses operating in the United States is now in first place, surpassing the oil business in Saudi Arabia, which had held the top spot for the past three years, and 20 out of the prior 23.

Resource curse  – A Static View of the Oil Picture

Here’s a static view of oil picture.

On the horizontal axis is daily oil production.

[drizzle]On the vertical axis is the country.

Each dot is labeled by the year, with the darker the orange, the more recent the year. The most recent years, 2010 to 2014, are highlighted in light blue, light green, red, yellow, and blue.

If you start with 2010 (light blue), it’s fairly easy to see the rapid rise in American oil production, largely thanks to shale oil.

Oil Production by Location of Business, Thousands of Daily Barrels Resource curse
Resource curse coming next to the US?

Resource curse – An Animated View of the Oil Picture

In terms of visualization, the static view leaves some detail out (in that it’s hard to see the changes across the years).

Here’s an animated view of the oil production figures by year.

The animated view shows the massive rise of Saudi Arabian oil in the 1970s, the relative decline of the U.S. over the same period, the strength of Soviet Union oil production until 1985 when it broke up (shown about half the way down as “Other Europe and Eurasia), and lots of other interesting stories (see Iran, for example).

Could the Resource Curse Come to the U.S.?

The rise of oil production in the U.S., and its associated risks, poses the question:

Could the resource curse come to the U.S.?

The resource curse is an idea in development economics that the blessing of having abundant natural resources is actually a curse.

Instead of producing stronger, more reliable economic growth, natural resource-rich countries may grow slower.

However, the effect is not present across the globe.

Some of the theoretical causes for reduced economic growth in natural resource-rich countries includes exchange rate appreciation and the associated reduction in the country’s tradable goods sectors, increased revenue volatility, a lack of attention to economic diversification, and a host of other potential impacts.

Possible in the U.S.?

So, is it possible that the natural resources curse could come to the U.S.?

The simple answer is – yes.

For example, anyone aware of government budgeting knows the mistakes natural resource-rich states like Texas and Alaska made. They spent bubble revenue from the booming oil sector on ongoing items like education and health care. And now they live with the aftermath, or the curse.

Another potential effect could be in human capital. American workers are mobile. If the natural resource industry continues to explode, it will attract the best and brightest of workers, potentially hurting the long-run competitive picture for the American economy.

Of course, these concerns are just that, potential concerns. Besides budgeting mistakes by state lawmakers and a few other examples, the natural resource curse appears to be absent from the American economy.

It is, of course, early in the game, though.

Conclusion

In a fascinating review of the state of the global energy picture, BP’s recent energy review highlights the massive rise in oil production in the United States.

The massive increase in American oil production gives rise to various questions, including whether the American economy could be subject to the resource curse, a long-debated issue in development economics.

Should the American landscape succumb to the curse, the outlook for the American economy may include shorter economic bursts and longer, slower recoveries. Kind of like what’s occurring right now.

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