Black Gold, Broken Nations: How Two Trillion-Dollar Gambles Defied the Oil Curse

Imagine discovering that the ground beneath your country contains trillions of dollars worth of oil. Your economy is about to explode. Your people are about to get rich.
Except they might not. Because oil wealth destroys more nations than it enriches.

For over a century, country after country has struck oil and followed the same script: boom, corruption, inflation, collapse. Economists call it the resource curse. The pattern is so predictable it's almost boring.

Until two countries tried something radically different.
Norway built a $1.7 trillion savings account and refuses to touch it. Saudi Arabia is spending over $1 trillion to build a post-oil economy before the oil runs out.
One is the ultimate delayed gratification experiment. The other is the most ambitious economic transformation in human history.
But to understand why these approaches matter, you first need to see how catastrophically wrong everyone else got it.

ACT I: THE CURSE

How Oil Ruins Countries (A Step by Step)

1. Country discovers oil

2. Money floods in

3. Government spending explodes

4. Corruption metastasizes

5. Economy overheats, inflation spirals

6. Oil prices crash (they always do)

7. Country collapses into chaos

   
   Let's watch it happen.

Venezuela: The Textbook Case

Venezuela should be rich. It has the largest proven oil reserves in the world—more than Saudi Arabia, more than Russia, more than anyone.
Oil was discovered in 1914. By the 1970s, Venezuela was riding high on OPEC price hikes. The government spent lavishly: subsidized gasoline to pennies per gallon, funded massive social programs, built gleaming infrastructure, nationalized industries.
When oil prices were high, the spending was unsustainable. When prices crashed in the 1980s, the economy went with it. And when Hugo Chávez came to power in 1999, he doubled down on oil-dependent populism.
The result wasn't just economic—it was enabled by corruption and political mismanagement that oil money amplified. Hyperinflation² reached over 1,000,000%. Oil revenues that should have been saved were instead stolen, wasted, or spent on unsustainable programs.
The devastation:

• GDP has collapsed 75% since 2013

• More than 7 million people have fled

• Private sector workers earn around $200-230/month; public sector workers far less—some teachers earn as little as $7/month

• Infrastructure crumbling, hospitals without medicine, frequent blackouts

• Oil wealth saved for the future: $0

Nigeria: The Corruption Multiplier

Nigeria discovered oil in the 1950s. By the 1970s, it was pumping billions of barrels. The money should have transformed Africa's most populous nation into a continental powerhouse.
Instead, oil money fueled one of the most corrupt regimes in modern history. Military dictator Sani Abacha alone is estimated to have stolen $3-5 billion in the 1990s. The Niger Delta—where the oil comes from—remains desperately poor while pollution destroys the environment.
The result:

• Despite decades of oil wealth, 40% of Nigerians live in poverty

• Infrastructure remains abysmal

• Oil revenues enriched a tiny elite while most citizens saw nothing

• Oil wealth saved for the future: $0

Britain: The Lost Opportunity

Even wealthy, stable democracies screw this up.
Britain discovered North Sea oil in the 1960s—the same fields Norway taps. From the 1970s through 2000s, Britain extracted billions of barrels worth hundreds of billions of pounds.
And spent it all.
The Thatcher government in the 1980s used oil revenues to fund tax cuts and current spending. No sovereign wealth fund. No long-term savings. When production peaked in 1999 and began declining, Britain had almost nothing to show for it.
The result:

• North Sea oil revenues: ~£400 billion over 50 years

• Amount saved for future generations: virtually zero

• Norway, tapping the same oil fields: $1.7 trillion fund

• The contrast is staggering. Same oil, same time period, completely different outcomes.

Scotland: The "It Could Have Been Ours" Tragedy

Scotland's relationship with North Sea oil is even more bitter. Scotland is not an independent country—it's one of the four nations that make up the United Kingdom, with a devolved¹ parliament that has limited powers over domestic issues like health and education. The oil fields sit in Scottish waters, but revenues went to Westminster (the UK government in London).
During the 2014 Scottish independence referendum, the Scottish National Party argued: "If we'd been independent, that oil money would have created a Norwegian-style fund for Scotland."
They're right. An independent Scotland discovering oil in 1970 could have built the same fund Norway did. Instead, the wealth was spent by London on current expenditures.
The result: Scotland got economic activity from oil jobs, but no permanent wealth. The oil is declining. Nothing was saved.

Alberta, Canada: The Almost-Fund

Alberta is fascinating because they almost got it right—and then didn't.
In 1976, Alberta created the Heritage Savings Trust Fund, inspired by Alaska's model. It was meant to be like Norway's fund.
But unlike Norway, Alberta couldn't resist spending it. Politicians raided it for current expenses. Contributions were reduced, then stopped entirely for years. The fund grew slowly while oil revenues poured in.
The result:

• Alberta has extracted trillions of dollars worth of oil since 1976

• The Heritage Fund today: about $23 billion CAD (roughly $17 billion USD)

• For comparison: Norway's fund is $1,700 billion—100 times larger

• If Alberta had followed Norway's model: could be $500+ billion

• Instead, the money was spent as it came in

The Pattern is Clear

Over and over, the same story:

• Oil money creates a spending boom

• Governments get addicted to easy revenues

• Corruption flourishes (oil money is easy to steal)

• The economy becomes dependent on oil

• When prices crash, the economy collapses

• Nothing was saved
  It's so predictable economists have studied it for decades. The "resource curse" is real. From oil in Venezuela to diamonds in Sierra Leone, the curse repeats: windfall wealth breeds conflict and collapse.

  Oil should make countries rich. Instead, it usually makes them dysfunctional, corrupt, and ultimately poorer.
  Only two countries have seriously attempted to break the curse: Norway and Saudi Arabia.
  They chose opposite strategies.

ACT II: THE SAVER

Norway: The Trillion-Dollar "No"
Norway discovered North Sea oil in 1969. They should have followed the same doomed path as everyone else.
At first, they tried to.
The Failed Experiment (1970s-1980s)
Through the 1970s and early 1980s, Norway did what everyone else did: spent the oil money as it came in. Infrastructure, subsidies, expanded welfare. The economy overheated. Inflation surged. Housing prices skyrocketed.
Then oil prices crashed in 1986, and Norway's economy nearly collapsed. The government devalued the currency. Unemployment spiked. Banks teetered. It was brutal.
But it was also transformative. Norwegian policymakers looked at the wreckage and asked a radical question: What if we just... didn't spend it?

The Insane Idea (1990)

In 1990, Norway created the Government Pension Fund Global—the "Oil Fund." The concept was almost absurdly simple:
Take ALL oil revenue
Put it in a fund
Invest it globally (never domestically)
Spend only 3% annually
The principal stays untouched. Forever.
This is politically insane. Imagine being a Norwegian politician in 1990. Oil money is flooding in. Voters want tax cuts, better services, higher pensions. Your opponents promise to spend the money NOW.
And you have to stand up and say: "No. We're saving it for people who aren't born yet."
It's a miracle it worked. But Norway had something most countries don't: recent, painful memory of what happens when you blow the windfall.
How It Actually Works
The rules are monastic:

HOW THE NORWEGIAN MODEL WORKS
WHAT GOES IN:
ALL petroleum revenues—every crown from oil and gas—flows into the fund. No exceptions.
WHERE IT GOES:
Invested exclusively OUTSIDE Norway (to avoid overheating the economy). Stocks, bonds, real estate worldwide. Managed by Norges Bank Investment Management.
WHAT COMES OUT:
Parliament can withdraw up to 3% of the fund's value annually (called the "fiscal rule"). That 3% funds about 20% of Norway's government budget. The rest stays invested, compounding forever.
WHY 3%?:
It's based on expected long-term real returns. If the fund earns 3% above inflation every year, you can spend that 3% and the principal never shrinks.
THE CATCH:
Norway calls it a comprehensive "welfare system" providing universal healthcare, education, generous pensions, and social services—funded partly by the disciplined 3% withdrawal from the fund. If markets don't deliver consistent returns, the system faces pressure.

The Numbers That Break Your Brain
As of 2024:

• Fund value: $1.7 trillion

• That's $340,000 per Norwegian citizen (population ~5 million)

• Owns 1.5% of all publicly traded companies globally

• Top shareholder in Apple, Microsoft, Amazon, Alphabet, Samsung, Nestlé, Toyota

• In strong market years, investment returns can exceed petroleum revenues

  
  

  The fund isn't just sitting there. It's actively invested in over 9,000 companies across 70+ countries. If you work for a publicly traded company anywhere on Earth, there's a decent chance Norway is one of your employers.

  The Ethical Twist

  
  Weirdly, Norway imposes ethical restrictions on itself. The fund divests from companies involved in weapons, severe environmental damage, human rights violations, and corruption.
  It's bizarre to see a sovereign wealth fund behave like it has a conscience. But Norway takes it seriously—they've excluded tobacco companies, weapons manufacturers, firms linked to deforestation.
  Critics call it performative. Defenders say Norway is proving you can be profitable and principled at scale.

  
  The Bet
  Norway is betting that:
  Global financial markets will deliver consistent returns for generations
  The 3% rule will sustain Norway's social programs long after oil runs out
  Patience wins

  
  The Risk
  What if markets don't cooperate? What if returns fall below 3% for decades? The principal slowly erodes. Future generations inherit a depleted fund.
  Some economists argue the 3% assumption is flawed—market volatility means you can't guarantee returns forever. If they're right, Norway may have been too conservative, missing opportunities to invest domestically.

  
  But for now, Norway has pulled off something almost no other oil nation has managed: they turned a temporary windfall into a permanent endowment.

ACT III: THE BUILDER

Saudi Arabia: The $1+ Trillion Race Against Time
Saudi Arabia knows the oil won't last forever. Peak oil demand is projected for the 2030s. The clock is ticking.
But unlike Norway, Saudi Arabia isn't saving for the inevitable. They're spending frantically to make oil irrelevant before it runs out.
The Awakening (2016)
Saudi Arabia's Public Investment Fund (PIF) was established in 1971 but remained sleepy for decades—a small fund managing domestic investments.
Then Crown Prince Mohammed bin Salman (MBS) launched Vision 2030 in 2016, and everything changed.
The plan: Transform Saudi Arabia from an oil-dependent kingdom into a diversified economy built on tourism, entertainment, technology, and finance. Do it in 15 years. Spend whatever it takes.
The PIF exploded:

• 2016: $160 billion

• 2024: $900+ billion (some estimates over $1 trillion with all holdings)

• 2030 target: $2.67 trillion

How Did It Grow So Fast?
PIF's explosive growth came from multiple sources:

• Oil revenue deposits: Continuous injections from petroleum earnings

• Asset transfers: The Saudi government transferred 8% of state oil giant Aramco shares to PIF

• Investment returns: The fund achieved a 22% compound annual growth rate through strategic investments

• Debt financing: $15 billion in syndicated credit facilities plus sukuk (Islamic bond) issuances
  That's not saving. That's spending.

The Opposite Philosophy
Where Norway invests 100% abroad, Saudi Arabia invests over 60% domestically. Where Norway spends 3% annually, Saudi Arabia deploys $70+ billion per year into transformation projects³ .
The strategy is simple: Build it and they will come.

The Gigaprojects
Saudi Arabia isn't making small bets. They're building entire cities from scratch:

• NEOM: A $500 billion (some say $1.5 trillion) futuristic mega-city in the desert. It includes:

• The Line: A 170km-long, 500-meter-tall linear city with no cars, no streets, just a straight line of buildings housing 9 million people

• Trojena: A year-round ski resort (in the desert)

• Oxagon: A floating industrial city

• Qiddiya: An entertainment city larger than Orlando, aiming to rival Disney World

• The Red Sea Project: Ultra-luxury tourism competing with Maldives and Mediterranean

• Diriyah Gate: A cultural/heritage district
  Plus: Massive investments in gaming companies (buying stakes in Nintendo, EA, Activision), sports (Newcastle United FC, LIV Golf), and tech startups globally.

The Transparency Problem
Unlike Norway's fund—which publishes detailed reports and holdings—Saudi Arabia's PIF is characterized as "among the world's least transparent" sovereign funds.
It's directly controlled by Crown Prince MBS. No independent oversight. No parliamentary approval needed.

Some of its notable controversial investments include:

• $2 billion to Jared Kushner's Affinity Partners right after he left the Trump White House

• Massive sports investments seen as "sportswashing" (buying legitimacy through sports)

The Bet

• They can build a post-oil economy before oil demand collapses

• NEOM and the gigaprojects will succeed—attracting tourists, businesses, residents

• Speed wins over patience

The Risk
What if NEOM fails? What if The Line is impossible to build or operate? What if tourists don't come to a desert kingdom with restrictive laws?
In 2024, Saudi Arabia took an $8 billion write-down on NEOM and other gigaprojects. The project is already facing massive challenges—engineering difficulties, cost overruns, questions about viability.
If the gigaprojects fail, Saudi Arabia will have spent over $1 trillion with little to show for it. The fund will be depleted. The oil will be declining. And the kingdom will face catastrophic economic crisis.

THE CONTRAST

THE VERDICT: WHO'S RIGHT?

Here's the uncomfortable truth: We don't know yet.
Norway's approach seems safe, prudent, brilliant. But it assumes markets will perform well for generations. If global returns stagnate, that $1.7 trillion might not generate enough to sustain Norway's social programs. The fund could slowly erode. Did they wait too long to invest in their own transformation?
Saudi Arabia's approach seems audacious, visionary, terrifying. If NEOM succeeds—if Saudi Arabia becomes a genuine tourism/tech/finance hub—it will be the greatest economic transformation in modern history. But if it fails, the kingdom will have squandered over $1 trillion on ghost cities in the desert.
The question isn't which approach is "right." It's which risk is more tolerable:
Norway chose the conservative path: save everything, invest globally, live off returns. It requires global markets to cooperate. The risk: Slow decline if markets disappoint.
Saudi Arabia chose the radical path: spend massively to build a new economy from scratch. It requires visionary mega-projects to succeed. The risk: Catastrophic failure if projects collapse.

THE LESSON EVERYONE IGNORES

Here's the irony: Both Norway and Saudi Arabia have shown that the resource curse can be broken. One through discipline and patience. One through ambition and spending.
But almost no one learns the lesson.

Venezuela, Nigeria, Britain, Alberta—they all knew about Norway's fund. They studied it. Economists wrote papers. Politicians cited it as a model.

And they did nothing.
Why? Because breaking the resource curse requires something rare: saying no when money is pouring in. It requires leaders who prioritize future generations over re-election. It requires resisting the temptation to consume your future.

Norway had the right conditions at the right time—and made the choice to save.
Saudi Arabia has absolute power concentrated in one man—and he's making a massive bet on transformation.

Most countries get neither opportunity. Or they get it and squander it.

The resource curse isn't inevitable. It's just incredibly hard to avoid.
And the two countries that avoided it chose completely opposite strategies.

One built a mattress. One built a dream. Both are racing against the same clock: the day the oil runs out.

Place your bets.

Further Reading & Resource Parallels

Curious about the world’s other resource fortunes—and failures? Explore these stories:

• Alaska Permanent Fund:
  America’s own oil experiment—a state fund that pays annual dividends to every Alaskan resident.
  Official site | Quartz: Alaska's Oil Dividend

• Botswana’s Diamond Miracle:
  While most of Africa suffered the “resource curse,” Botswana used diamond wealth to drive development—becoming a regional success story.
  The Economist on Botswana

• China Investment Corporation:
  China built one of the world’s largest sovereign wealth funds—not with oil, but trade surpluses, showing a different route to national fortune.
  CIC official website | SWFI: China’s Funds

• Africa’s “Other Curse”: Gold, Diamonds, and Conflict:
  From Sierra Leone to DR Congo, diamond and gold booms led to war, corruption, and tragedy.
  BBC: Blood Diamonds in Africa
  De Beers/Botswana Partnership

• Sovereign Wealth Funds Explained:
  How countries like Norway, Singapore, and the Middle East built up—and sometimes lost—national fortunes.
  The Atlantic: The World’s Biggest Wealth Fund

What bizarre historical phenomenon should we investigate next? Drop us a line at [email protected].

Unsubscribe | View in browser | Past issues

1  Sovereign Wealth Fund:
A sovereign wealth fund (SWF) is a massive, state-owned investment fund built from government surpluses—usually oil, gas, or resource profits, but sometimes trade or currency reserves. Often called “pension funds” (like Norway’s Government Pension Fund Global), they almost never pay actual pensions. Instead, SWFs invest worldwide to grow national wealth for future generations, stabilize budgets, and fund major projects.

• Funded by resource profits or exports

• Invested globally (stocks, bonds, real estate)

• Strict withdrawal rules (e.g., Norway’s 3% rule)

• May pay citizen dividends (Alaska’s does), but rarely direct pensions

Bottom line: Not your granddad’s pension—these are mega-bank accounts for nations, not individuals.

1  Devolved Parliament:
A local legislature with powers granted by the national government. It controls local issues (health, education), but not national decisions like budgets, foreign policy, or defense.
Example: Scotland’s Parliament is devolved—London (Westminster) retains control over oil revenue and international policy.

2  Hyperinflation:
When prices spiral out of control—rising by hundreds or thousands of percent in months—money rapidly loses value. Shops change prices daily, wheelbarrow cash can’t buy bread. Caused by printing too much money, loss of confidence, or resource crash.
Examples: Venezuela (1,000,000%), Zimbabwe (billions %).
Why it matters: Hyperinflation destroys economies, savings, and governments.

3  PIF’s annual spend (about 7% of fund value) is actively replenished by oil revenues and investments, but some economists warn this pace could be risky if Saudi Arabia’s giga-projects fail to deliver major returns.