Sunday, May 26, 2013

Dutch Disease

Dutch disease is an economic phenomenon in which the revenues from natural resource exports damage a nation's productive economic sectors by causing an increase of the real exchange rate. This makes tradable sectors, notably agriculture and manufacturing, less competitive in world markets.


If methane hydrate allows much of the world to switch from oil to gas, the conversion would undermine governments that depend on oil revenues, especially petro-autocracies like Russia, Iran, Venezuela, Iraq, Kuwait, and Saudi Arabia. A gush of petroleum revenues can actually weaken oil-rich economies by crowding out other business.