Compare and contrast a single resource economy with a diversified economy

It is risky for a nation’s economy to be overly dependent on any one business, especially a single raw commodity, like oil. Such commodities are subject to sudden fluctuations in price. While world demand for oil is high, and while a nation’s reserves last, that nation might be very wealthy. But what would happen to that economy if oil prices fell? If demand for oil fell as a result of new, greener energy technologies in the 21st century? If oil supplies ran out, as all finite supplies do?

The answer of course, is that that nation’s economy would be developed. Nations like Saudi Arabia and Venezuela - prosperous by world standards, as a result of large oil reserves - have recently suffered very dramatic economic contractions a result of falling oil prices. According to The Independent, shopkeepers in Venezuela have begun weighing cash rather than counting it - a sign of catastrophic hyperinflation as the nation’s economy spirals out of control. The paper writes,

"Oil makes up a staggering 95 per cent of Venezuela’s exports, and accounts for a quarter of the country’s economy, with oil-related revenues having historically supplied roughly half the government budget. This kind of over-reliance on a single export notoriously depresses all other industries in a country."