Oil Transition Could Spark Conflict and Migration Without Urgent Help for Nigeria, Others, Experts Warn

Conflict, migration and economic upheaval will accompany the global move away from oil unless governments act urgently to help the worst-afflicted countries cope, new research from the E3G thinktank has found. Nigeria, Iran, Angola and Algeria are among the producers most exposed, because they lean heavily on oil revenues for government and public services, have little diversification and too little capital to cushion the blow.

The report, published on Tuesday, was compiled over two years, partly by war-gaming scenarios for declining oil demand with more than 100 public servants and experts from around the world.

Revenue collapse from 2030

Oil income makes up more than 40% of government revenue in 17 countries. In Iraq and Libya it represents 70% to 90% of government revenues. That money will fall rapidly from 2030. E3G forecasts Algeria will suffer an 87% drop in revenue and Nigeria more than 60%.

Global oil demand is forecast to plateau in the coming decade, with a peak likely in the early 2030s. Producers will then chase a shrinking pool of buyers. The cheapest producers with abundant resources, such as Saudi Arabia and the United Arab Emirates, are likely to win against those with less advanced infrastructure.

Debt will add to the pressure. Angola and Mexico already spend more than a quarter of their government revenue servicing public debt, the report found.

Oil use is already waning in many countries as renewable energy grows, a shift hastened by the Iran war, which constrained supply and sent prices soaring, triggering high inflation and political instability.

Venezuela as a warning

The report points to Venezuela, which was suffering collapse and has had a partial takeover of government by the US, now shattered further by earthquakes, as a warning of what is at stake.

"Governments are not thinking about and not prepared for [these outcomes]," said Beth Walker, co-author of the report. "The transition becomes riskier for everyone when oil producers are left to adjust on their own, and oil markets left to manage themselves. Producer fragility becomes a global security risk."

Walker singled out Algeria as "one to watch", given its position near Europe's borders and almost total reliance on the EU for exports. She described the risk as a series of national fiscal crises rather than one dramatic global oil crisis, pointing to unrest and migration in Algeria, a more brittle settlement in Iraq with spillover into Gulf stability, weaker state capacity in Nigeria with spillovers across Africa, and military competition over oil infrastructure in Libya.

Bob Ward, policy director at the Grantham Research Institute at the London School of Economics, who was not involved in the report, said developed countries would also feel the shock. "We should be clear that the highest-cost producers will likely be the first to feel this shock. The North Sea has high operating costs and so is unlikely to be economically viable once demand starts to fall sharply and market prices reduce," he said.

What it means for Nigeria

For Nigeria, a revenue drop of more than 60% from 2030 would widen the gap in funding basic services and weaken state capacity. The report argues that the International Monetary Fund, the World Bank, private financial institutions and governments must work together, and that slowing the transition is not a solution.

"A slow but chaotic transition can be just as destabilising as a fast one, maybe even more so," said co-author Maria Pastukhova. "Major demand powers need to coordinate and communicate more clearly about their future demand."

China drove rising oil demand for decades, but its consumption is now falling, partly on rapid electric vehicle uptake. India's direction is less certain and could prove pivotal.