© Peter Dicken 2015
‘Making Holes in the Ground’:
The Extractive Industries
Global Shift
Chapter 12
Review
• Concepts to Review
– GPNs, unequal distribution of resources,
Kondratiev long waves, role of the state
• Key Words
– Natural resources, resource dependency, role
of technology in globalization, nationalization
versus privatization, product diversification
The Extractive Industries: Definition
and Structure
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Natural Resources
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Characteristics of the Extractive Industries
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An element or material occurring in nature
Only a resource if defined as such by users
The key ones at present are non-renewable, and locationally specific
This affects the nature and development of the extractive industries
A mix of private firms (TNCs) and state-owned enterprises (SOEs)
Production circuits are capital and technology intensive
Market for extractive industries is very volatile
Sector is more sensitive to general state of the economy than many other sectors
The Extractive Cycle
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Sequence of stages: exploration, development, extraction, processing, distribution,
consumption
Challenges for firms
The time and investment needed to develop a new resource can be long
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Exploration, processing and distribution involve high sunk costs
Transience of resource booms
Rise in the influence of specialist services firms
Role of the State in Resource
Development
• The State and Resources
– State acts as a regulator and an operator (i.e. producer) of resources
– Outside investment means loss of control
– Usually initial development is outside-investment dependent, then once
it is going strong it is nationalized
– Varies by sector
• Power Relations
– Power relationships between states and firms are dynamic and
contingent
– States have potentially enormous power over resource exploitation,
though how much in practice depends on the state’s strength and
political orientation
– Once private capital is sunk, advantage moves to the state which
controls access to the resource
– State–firm rivalry exists, also state–state rivalry
Oil and Copper
• Copper
– Crucial for electrical use and thus telecommunications
– World copper production has increased more rapidly than oil in past 20
years
– Polarized between large established mining TNCs and small exploration
companies with no production
• Oil
– Two countries account for 68 per cent of world total
– Emphasis is on supply diversity, security and development of regional
availabilities, leading to a more complex oil map today than before 1970
– Nationalization enables oil producing countries to control production,
prices
– OPEC: founded 1960s, to ‘defend’ oil prices
– Capital intensity of the industry also reinforces position of major
companies
The End of the Extractive
Industries?
• Two views of the future
– Malthusian view
– Optimistic view
• However, there are environmental and
ecological issues which relate to continued
resource exploitation
– Consider the impact in light of these two views