Oil transition may spark instability in dependent nations
A new report from the E3G thinktank warns that countries dependent on oil exports, such as Nigeria and Algeria, could face conflict and migration as global demand for oil declines. The authors urge governments to assist these nations in diversifying their economies to avoid instability. The transition away from oil is already underway, with demand expected to plateau in the coming decade.
The E3G study involved two years of stress-testing various demand decline scenarios with over a hundred global experts. Projections indicate Algeria could see an 87% reduction in oil-related state income, while Nigeria faces a drop exceeding 60% after 2030. In 17 countries, petroleum provides more than 40% of public finances, with Iraq and Libya relying on it for up to 90%.
The ongoing Iran conflict has already accelerated the shift by disrupting supply and driving up prices, worsening inflation. Grantham Institute's Bob Ward cautions that expensive extraction sites, such as the North Sea, may become unprofitable as demand drops. Co-author Maria Pastukhova warns that a gradual, disorderly transition might prove just as disruptive as an abrupt one.
The report indicates that nations heavily reliant on oil revenues could face severe fiscal strain, potentially leading to internal unrest and cross-border migration as public services deteriorate. Lower-cost producers may dominate the shrinking market, leaving others economically vulnerable. This fragility could create broader global security challenges, affecting energy markets and refugee flows. Even developed regions with high extraction costs, such as the North Sea, may experience economic shocks. The precise timeline and severity of these impacts remain uncertain, though the report suggests coordinated international action could help manage the transition.