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How Energy Produces Inequality? - Onurcan Mısır

Our energy consumption determines many aspects of our daily lives. We use energy in our houses, cities, transportation, infrastructure, facilities, and the trade of energy directly correlates with the well-being of all these concepts. Hence, almost every country on earth is concerned with its energy security. They are trying to achieve an energy mix to uphold their energy systems so that even if one source of energy goes missing from the equilibrium, the system will not halt and be provided with other sources. Autarky and a flexible trade regime are thus necessary for the continuity of development. However, there is another crucial reason to pursue flexibility in one’s energy mix: That is the concern of social inequality.

Almost every World Bank Development Indicator presents a clear correlation with the energy consumption of a country. Indicators such as health, wealth, nutrition, water, infrastructure, education, even life expectancy are significantly related to the consumption of energy per capita. According to the quantitative work by Philip J. Lloyd, for energy use below 1000 kg oil equivalent, there is a strong likelihood that over 15% of the population will be undernourished. Moreover, about 5% of the total energy used worldwide is employed in treating and distributing water. If the nation has low energy use (<500 kg/capita), more than a quarter of the population will not have access to clean water. As the most important result of all these figures, life expectancy rises with the rising energy usage. In short, the use of energy almost always shows a positive impact on the well-being of individuals and society in general.

On the other hand, it is also clear that countries that own rich energy resources differ significantly from each other in human development. Thus it is not correct to establish a direct correlation between energy resources and the well-being of the society, for many factors during the production, transfer, and usage of the energy affect the social outcomes. These factors, combined with the political environment in the country in question, may even lead to disastrous results. This is the resource trap: A dilemma in which countries that hold vast amounts of hydrocarbons have stagnant economic growth or even economic recession. The resource trap is mainly expected to happen when a government focuses almost all of its production on a single industry, such as mining or oil production, and neglects investment in other major sectors, failing to establish a proper energy mix.

At times, government corruption and oligopolies that are held by companies close to public offices may even make the situation worse. Suppose a large share of national wealth is concentrated in just a few industries and oligopolies. In that case, the government might abuse its regulatory powers by awarding valuable contracts based on bribes. If too much labor and capital flow into just a tiny handful of sectors, it may weaken the rest of the economy and harm the country overall.

Such a trap would even be detrimental to social justice in the country. Michael Ross’s 2008 work titled “Oil, Islam and Women” claims that too much economic emphasis on hydrocarbon industries in a country would eventually lead to fewer rights and freedom for women. Since women mainly earn their wages in the traded sector (agriculture and manufacturing), establish a connection with their peers in factories that work on trade and gain more influence within their families and there are fewer jobs for women in hydrocarbon industries and facilities, they will be deprived of all these gains if hydrocarbon industry takes over the economic processes. Ross, comparing Middle Eastern countries with very similar cultural and religious customs, reaches some intriguing results.

Women in countries that own richer oil resources tend to have fewer rights and freedoms than women in countries that do not put such a vast emphasis on hydrocarbon industries. In short, “Oil production reduces the number of women in the labor force, which in turn reduces their political influence.” Such gender inequality definitely paves the path for even bigger inequalities and problems in the future.

Therefore, even though energy consumption clearly leads to development and is now an unbreakable part of our lives, many countries in the past have also seen very detrimental aspects of it. It has the potential to damage the socioeconomic balance of the country if it is not planned and controlled well. This is why every country, especially those that recently set aims to produce oil and gas and have a voice in the supply side of the equilibrium like Turkey, should be aware of the potential damages and plan the whole system accordingly.

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