The answer is 2 fold:

1. The governments revenue, for those countries whose revenues come 90% from oil, which include most states in the middle East, Venezuela, Nigeria, and a few others behave in the same way all states around the world do. They play to interests of their revenue base. Throughout the western world, their revenue base is people, so their are many social programs and the development of infrastructure and whatnot. In these oil dependent governments, their revenue base is oil, so they put all their money into maintaining that largely ignoring the populous simply because they don’t need them to run an effective administration. The money not used for this development, and sometimes their own personal enrishment goes into answer 2….

2. The rest of the money is essentially used to buy off the citizenry. In large part, most of these governments are dictatorial and not greatly developed leaving a poor angry populous. The rest of the money is used to either directly pay off people or subsidize commodities like oil and food. The problem with this is of course that when oil prices go down, there is less revenue for the state to put into paying people off and subsidies…..which eventually leads angry people used to their cheap stuff and free monthly pay checks to riot.

I hope that answers atleast some of your question.

Also how would any other fuel be different then oil? CNG, biofuels, current extraction of hydrogen, new productions of ethanol??? Same conditions would happen so I’m not sure it is a sound argument to just be worried about trying to reduce oil with other fuels. Improvements in battery technology and decentralized energy inputs seems to be a better investment than current short-term schemes and getting bent over about uses of petroleum.