The Gulf countries are laboratories where the answer to one of the most vexing questions of our time is being sought. Can petrostates—that is, nations whose economies rest almost exclusively on the production and export of oil and gas—diversify and generate other sources of economic activity and growth?
As the social, political and economic pressures to lower the world’s consumption of hydrocarbons mount, identifying and encouraging other sectors that could drive the economy have acquired unprecedented urgency for oil exporting countries.
Oil not only shapes a country’s economy, it also determines many traits of its state, its politics and even its culture. The options open to petrostates at this juncture are more determined by previous conditions and decisions than those of nations with more diversified economies. The influence of the past in defining the set of options available to a country or a company is what social scientists call “path dependence.” And petrostates suffer an extreme case of path-dependence. Can they break away from their past trajectory?