How the Oil and Gas Industry Influenced Third World Countries on Social, Economic Aspects - Capstone Project Example

Most of these countries have vast oil potential, some of which have been utilized, but a larger percentage stays untapped.

The discovery of oil and gas in a particular country can lead to economic prosperity, but there are cases where this is not so. A careful review of the literature indicates that countries said to be lucky – due to the presence of oil in their territory – are struggling to break loose from poverty and are still considered developing or rather Third World. This is attributed to the resource curse, which studies explain that oil and gas-rich economies are ‘among the least growing economies’ (Gelb, 1988; Auty, 1990; Berge et al., 1994; Sachs & Warner 1997 as cited in Ibrahim, 2008, p. 171).

The world economy as a whole grew with the discovery of oil and gas. The past century and new millennium have seen energy described as wealth. Oil is used as fuel for transportations, manufacturing pl, ants and industries while natural gas is essential for household consumption. Oil and gas form the basic component of its producing economies and is also a major constituent of the world’s energy system (Roupas et al. 2011 as cited in Seljom & Rosenberg, 2011, p. 102; Inkpen & Moffett 2011, p. 6). Oil exports add greatly to a country’s gross national product through foreign exchange. However, oil and natural gas resources are limited and reducing dependence on these resources is encoder to attain a more sustainable era (Atsegbua 2012, p. 480).

Fossil fuel is crucial to the global economy. Oil prices influence world ‘economic forecasts and performance’ (Ibrahim 2008, p. 170). In international commerce, crude oil and processed petroleum products comprise the largest single item, no matter how this is measured (Stevens 2005, as cited in Ibrahim, p. 170). Oil price hikes have a negative impact on the macro-economy of oil-dependent countries, particularly the emerging markets or the Third World (Coffman 2010, p. 599). The industry also impacts the environment by increasing air pollutants, such as greenhouse gases, and exacerbating climate change and global warming.

The peculiarity of oil and gas is that it is abundant only in a few countries. Since the early 1900s when oil was only newly discovered, it has continuously increased in price (Malita 2009 as cited in Ciprian-Beniamin & Adrian, n.d.) although there is a fluctuating trend when it comes to prices. Price fluctuation is a problem of oil-producing economies in that when demand goes down, oil price tends to fall, which then affects prices of basic commodities.