Assessing the Local Developmental Impact of Hydrocarbon Exploitation in a Mature Region: A Random Forest Approach

The impact of natural resource exploitation has been a controversial topic, subject to intense debate. The literature has traditionally focused on its consequences on national socioeconomic development. More recently, scholars concentrated on local effects following greater availability of data at the subnational and project level. We add to the literature by concentrating on Romanian oil and gas operations, a mature region with a long history of hydrocarbon activities. Such regions have seldom been studied and we argue that in light of the ongoing energy transition these should garner greater interest, particularly those located within the European Union where environmental pressure is significant. Our methodology consists of testing the ability of the random forest classification algorithm to distinguish between local communities with oil and gas operations present and those without on a number of indicators which could be broadly considered developmental. The algorithm fails to accurately classify hydrocarbon-intensive communities, indicating that there are no significant differences between these and the rest. We argue that this is likely due to the limited tax collection powers of local governments, with royalties going directly to the central government with no specific distribution provision at the local level. Another potential explanation may be the diversification of local economies and existing related manufacturing and services activities.