Too much oil

It is surprising how excess of anything can be damaging to any economy...
Some thing every one treasure in today’s world can also have negative effects in a developing economy.
Oil also known as black gold today is one of the key ingredients if the industrial world, its absence means throwing a country back into Stone Age. Without it even the lives of common man would be in jeopardy. It is amazing how we have learnt to exploit black liquid to such an extent that our existence is dependant on it. Any economist or industrialist would be afraid to sit back & rationally think about the consequences of the exhaustion of this black liquid.

About 4 months back I read an article regarding Russia expanding its oil fields, there after about the environment & the lack of oil, now I came across an article reading it i was rather surprised, it was about the problem of excess oil in the developing countries & its harm to the developing economy

It is also called the curse of oil or the paradox of plenty according to economists. The usual explanation for this is “Dutch Disease”, named for the hardships that befell the Netherlands after it found North Sea gas. When a country strikes hydrocarbons, a sudden inflow of dollar-denominated revenues often leads to a sharp appreciation in the domestic currency. That tends to make non-oil sectors like agriculture and manufacturing less competitive on world markets, thus leaving oil to dominate the economy.

Unlike agriculture, the oil sector employs few unskilled people. The inherent volatility of commodity prices hurts the poor the most, as they are least able to hedge their risks. And because the resource is concentrated, the resulting wealth passes through only a few hands—and so is more susceptible to misdirection.

This misdirection points to another explanation for the oil curse that is gaining favour: politics. Because oil money often flows directly from Big Oil to the Big Man, as Africa's dictators are known, governments have little need to raise revenues through taxes. Arvind Subramanian of the IMF argues that such rulers have no incentive to develop non-oil sources of wealth, and the ruled (but untaxed) consequently have little incentive to hold their rulers accountable.

As a result the agricultural industry suffers considering that oil dominates the boosted market in the developing nation, this causes a set back in the agro-based industry.
The people in the agricultural sector suffer due to the oil monopolization. In developing countries, raids are the rule rather than the exception. Zambia set up a stabilization scheme to manage mineral exports; but as prices soared in the 1970s, the government dropped it—and years of pain followed when prices fell again. Venezuela set up a fund for the future, “El Fondo de Inversiónes”, in 1974, but was soon raiding the kitty. An orgy of domestic spending left the country with a herd of white-elephant projects, huge foreign debt and declining social spending.

There are how ever exceptions countries like Persia have escaped the oil curse, by trying to diversify their economies.
An analysis by Paul Collier of Oxford University suggests that for any given five-year period, the chance of a civil war in an African country varies from less than 1% in countries without resource wealth to nearly 25% in those with such riches. Mr. Subramanian concludes that economic factors like the Dutch Disease and corruption alone do not explain the oil curse. He maintains that the problem is weak institutions.