This chapter focuses on explaining the powerful logic of perilous promises and hidden information, as well as the dangers of low opportunity costs and attractive rents. We start out by explaining how in many circumstances peaceful bargaining succeeds in preventing hostilities – as the “peace dividend” creates a range of win–win bargaining solutions. Sadly, though, asymmetric information, commitment problems and political bias can lead to bargaining failure and the outbreak of war. Further, when the stakes of contest are high and opportunity costs low, the scope for peaceful bargaining shrinks. In particular, we show that being out of work and out of options makes somebody easy prey for rebel headhunters. This is exemplified by the dreadful consequences of bad harvests. Next, we examine the role of ethnic cleavages and how they tend to be exploited by divisive ethnic politics. Finally, the chapter discusses the curse of natural resources. Countries blessed with valuable soils tend to suffer from conflict, often leaving them poorer than countries lacking natural resources.

This chapter starts by outlying the key characteristics of oil use, including: i) The history of oil; ii) Where oil resources are currently located across the globe, also with a focus on the difference between conventional and unconventional resources; iii) Technological aspects of oil exploration, production and transport; iv) Global oil production, consumption and trade trends. It then analyses the geopolitical issues associated with oil, including: i) How changes in the locations of oil supply could affect global security; ii) How changes in the locations for oil demand could affect global security; iii) The current “chokepoints” in transporting oil supply to users, and how their risks could be addressed.