A report from the E3G thinktank has found that the global shift away from oil will create significant geopolitical and economic challenges for countries heavily reliant on petroleum revenues. Nations including Nigeria, Iran, Angola, and Algeria face severe difficulties due to their dependence on oil income for government operations and public services, combined with limited economic diversification and insufficient capital reserves to manage the transition.
Global oil demand is expected to plateau during the coming decade, with peak demand likely occurring in the early 2030s. This trajectory will force oil-producing nations to compete for a diminishing pool of buyers. Countries with lower production costs and more advanced infrastructure, such as Saudi Arabia and the United Arab Emirates, are positioned to maintain market share, while higher-cost producers face mounting pressure. The report cites Venezuela as a cautionary example of the instability that can result from inadequate preparation for such transitions.
The fiscal impact on oil-dependent governments will be substantial. E3G forecasts that Algeria will experience an 87 percent decline in oil revenue, while Nigeria faces losses exceeding 60 percent. In 17 countries globally, oil comprises more than 40 percent of government revenue, with some nations such as Iraq and Libya deriving between 70 and 90 percent of state income from petroleum. These revenue shortfalls will create gaps in essential public services, destabilizing societies and increasing debt burdens, particularly in countries already spending significant portions of revenues on debt servicing.
Experts caution that the resulting instability could manifest as civil unrest, mass migration, regional conflicts, and weakened state capacity across Africa, the Middle East, and other oil-dependent regions. However, researchers emphasize that slowing the energy transition is not a viable solution, as climate imperatives demand continued momentum. Instead, coordinated international action involving the International Monetary Fund, World Bank, private financial institutions, and governments is necessary to help affected nations adjust. Future oil demand trajectories in major emerging economies, particularly India, will significantly influence whether the transition occurs rapidly enough to mitigate the worst outcomes.
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