Intrastate conflict and oil shortage

In this paper I investigate how often and how much outbreaks of intrastate conflict in oil producing states translates into oil supply shortfalls. The Libyan conflict that broke out in February 2011 highlighted the fear that intrastate conflict in oil producing states may imply shortfalls and ensuing volatile global oil prices. I argue, however, that it is far from certain that shortfalls following conflict outbreak will occur, since both sides in a conflict face incentives simultaneously to protect and maintain oil installations and to strike and destroy these. Based on a quantitative analysis of 39 intrastate wars in oil producing countries (1965–2007) I conclude that outbreak of conflict does not translate into production decline with any certainty. In fact, likelihoods are less than 50% for reductions to occur. In many cases growing production actually followed conflict outbreak. I conclude by investigating four characteristics of intrastate conflict that may explain when oil production is at risk during conflict: (1) proximity of oil producing fields to key battle zones, (2) duration of conflict, (3) separatism and the location of oil in separatist territory, and (4) the relative size of oil production. While the first three factors did not prove important, oil producer size could be significant. But further research is needed to establish this with greater certainty.JRC.C.3-Energy Security, Distribution and Market