Does oil undermine democracy? Energy consultant J. Robinson West, writing in the Washington Post, thinks so; Oxblog's David Adesnik appears to agree. West sums up the case as follows: "Nearly every country with an economy dominated by oil is corrupt and dictatorial, whether in Latin America, Africa, the Caspian, Southeast Asia or the Middle East. The notable exception is Norway."
I am reminded of Amy Chua's similar confusion of cause and effect regarding ethnic conflict. Chua, you will recall, argued that the advent of free-market democracy in some countries leads to the rise of "market-dominant minorities", which in turn incites ethnic hatred, often culminating in brutal violence against the successful minority. (I offer a hearty ICBW welcome to the literally hundreds of Googlers who found this blog while searching for "Amy Chua"--presumably after seeing her hawk her book on C-SPAN's "Booknotes" this past weekend.)
Unfortunately, Chua got it exactly backwards: societies lacking in the kind of social (including interethnic) peace and civility associated with modern, educated free-market democracies also tend to be so economically underdeveloped as to depend on a tiny (usually immigrant) minority for nearly all their economic activity--hence the "market-dominant minority", and the resentment it arouses. Societies not prone to slaughtering their successful subcultures, on the other hand, have typically figured out how to advance economically to the point where no single subculture can dominate the economy.
Similarly, oil is not inherently disruptive of responsible democracy; not only has Norway's democracy survived an oil boom intact, but so has democracy in Mexico, Western Canada and (of course) various regions of the US, such as Alaska. Now, these countries' economies aren't as completely oil-dominated as those of, say, Saudi Arabia or Nigeria--but that's primarily a reflection of their already-modern, developed societies, not of their oil or the revenue it earns. That is, their relatively advanced economic and political development make their oil industries a less dominant economic and political factor--not vice versa.
Venezuela is a striking example; its multi-year decline from corrupt but functioning democracy to populist near-dictatorship is obviously uncorrelated with its steady oil revenue over that period. Rather, the strain on its democratic institutions is a product of a huge, growing, and increasingly dissatisfied impoverished class, ripe for exploitation by a charismatic demagogue like the current president. Had it had no oil at all, Venezuela's poverty (and civil strife) problem would surely have been, if anything, even more severe, and its democracy thus even more imperiled.
Likewise, the backward oil satrapies of the Middle East, Africa, and Central Asia are generally no more (nor less) corrupt or dictatorial than their petroleum-deprived neighbors. They may be unable, because of their economic and political underdevelopment, to put their oil windfall to good use, but neither are they harmed the way West and Adesnik would have us believe. For each such country, after all, there is a nearby one with every bit as much corruption, poverty and repression, but no spectacular resource income to waste. How, then, can oil be to blame?