HE effect of natural resource wealth and income on political institutions is a central issue at the intersection of economics and political sciences. We contribute to this research by examining the effect of international oil price fluctuations on democratic institutions over the 1960–2007 period. We also exploit the very persistent response of aggregate income to oil prices to study the effect of persistent (oil-price-driven) income shocks on democracy. Our results indicate that countries with greater net oil exports over GDP see improvements in democratic institutions following upturns in international oil prices. For example, positive oil price shocks lead to improvements in the Polity democracy score, as well as the subscores for executive constraints, executive recruitment, and political competition, and a higher probability of a democratic transition. We estimate that an oil-price-driven 1 percentage point increase in per capita GDP growth increases the Polity democracy score by around 0.2 percentage points on impact and by around 2 percentage points in the long run. The effect on the probability of a democratic transition is around 0.4 percentage points. Our work relates to the literature on the link between political institutions and natural resource wealth and income. An influential early contribution is Lipset (1959), who documents that high-income countries tend to be more democratic. He argues that this positive correlation arises because higher per capita income is a symptom of the modernization of society and that modernization also increases citizens’ demand for political participation. The positive association between income and democracy has also been emphasized by Huntington (1991), who holds that higher per capita income was one of the key factors behind the