From Oil to Gold: Rethinking Economic Dependence on Energy Commodities

By Tara Shwan, 
Executive Director,
American-Kurdish Economic Institute, AKEI

In the modern global economy, overreliance on oil has proven to be an increasingly risky strategy for both national economic systems and private corporations. While oil has historically been a cornerstone of industrial growth and energy production, its price volatility, high operational costs, and exposure to geopolitical and environmental pressures make it an unstable foundation for long term economic sustainability. In contrast, commodities such as gold have demonstrated greater price stability and reliability, particularly during periods of economic uncertainty, positioning them as safer assets for preserving value.

One of the primary weaknesses of oil as a dependency is its frequent and often unpredictable price fluctuations. Oil prices are highly sensitive to a wide range of external factors, including geopolitical conflicts, trade policies, production quotas set by major exporters, technological shifts, and sudden changes in global demand. Events such as wars, sanctions, pandemics, or even policy announcements can trigger sharp price swings within days or weeks. This volatility creates significant challenges for governments and corporations attempting to plan budgets, forecast revenues, or make long term investments. When an economy or company is heavily tied to oil revenues, sudden price drops can result in budget deficits, layoffs, and stalled development projects.

In contrast, gold has long been regarded as a “safe-haven” asset. Its value tends to remain relatively stable, and in many cases even increases, during times of economic instability or inflation. Investors often turn to gold when confidence in currencies or financial markets weakens, reinforcing its role as a reliable store of value. Unlike oil, gold prices are less affected by short-term political disruptions or supply shocks, making it a more dependable commodity for wealth preservation and economic resilience.

Another critical issue with oil dependency lies in the immense costs associated with oil production and operations. Extracting oil is a capital-intensive process that requires significant investment in exploration, drilling infrastructure, refining facilities, transportation networks, and environmental compliance measures. As oil reserves become harder to access, production increasingly relies on deep-water drilling, shale extraction, or other technically complex methods, further driving up costs. These high operational expenses mean that many oil companies require relatively high market prices simply to break even.

The views expressed in this article are those of the author and do not necessarily reflect the views of Kurdistan24.