Energy transition could squeeze oil-dependent economies as global crude demand approaches its projected peak……
Nigeria could face a sharp deterioration in government finances from 2030, with oil revenue projected to fall by more than 60 per cent as global demand for crude declines, according to a new report.
The projected drop is linked to the accelerating shift from fossil fuels towards renewable energy and electric vehicles, a transition that researchers warn could expose countries heavily dependent on oil income to severe fiscal and economic pressures.
The report, produced by think tank E3G and published by The Guardian UK, identified Nigeria among oil-producing countries considered particularly vulnerable to falling crude demand because of its reliance on petroleum revenues and limited economic diversification.
It said global oil consumption was expected to level off over the next decade before reaching a likely peak in the early 2030s.
As demand weakens, oil-producing countries could increasingly compete for a smaller pool of international buyers, putting pressure on both production volumes and government earnings.
Nigeria is projected to be among the countries most exposed to the shift. The report estimated that the country could suffer a decline of more than 60 per cent in oil revenue from 2030.
Algeria faces an even steeper outlook, with the study projecting an 87 per cent drop in oil revenue.
The report said the impact would be particularly severe for countries where petroleum income provides a large share of government revenue, potentially leaving governments with fewer resources to finance public services and meet debt obligations.
It warned that the resulting fiscal pressures could extend beyond economic difficulties, potentially creating security and political challenges.
Beth Walker, a co-author of the report, said governments were not doing enough to prepare for the consequences of falling oil demand.
“Governments are not thinking about and not prepared for these outcomes. The transition becomes riskier for everyone when oil producers are left to adjust on their own and oil markets are left to manage themselves. Producer fragility becomes a global security risk,” Walker stated.
The study found that oil revenue currently represents more than 40 per cent of government income in 17 countries, while the dependence is significantly higher in nations such as Iraq and Libya, where it accounts for between 70 and 90 per cent.
For Nigeria, the researchers warned that a sustained reduction in oil income could undermine the government’s ability to provide essential services while creating wider economic and security pressures.
Walker said the threat was unlikely to emerge as one single global crisis but could take the form of multiple fiscal crises in individual countries, potentially triggering unrest, migration and security problems.
She singled out Nigeria as a major concern because of its population size and strategic importance to Africa.
“Most of these problems are on a much larger scale than Venezuela, and they could all unravel just as the UK and Europe’s capacity to contain live conflicts is drained,” she said.
Global Oil Demand Faces Structural Shift
The report said the transition away from oil was already reshaping energy markets, with the expansion of renewable energy contributing to weaker oil consumption in some economies.
China, which has traditionally been a major driver of global oil demand, is also recording a downward trend in consumption, partly as electric vehicle adoption accelerates.
India could become increasingly important to the future of global oil demand, although researchers said the country’s consumption trajectory remains uncertain.
The study cautioned that delaying the transition away from fossil fuels would not eliminate the risks facing oil-producing economies, particularly as climate pressures intensify.
“None of this is an argument for slowing the transition. A slow but chaotic transition can be just as destabilising as a fast one, maybe even more so,” another co-author, Maria Pastukhova, said.
The E3G research was conducted over two years and involved “war-gaming” different scenarios surrounding declining oil demand with more than 100 public servants and experts from various countries.
The researchers called for governments and international financial institutions, including the International Monetary Fund and World Bank, as well as private lenders, to work together to help oil-dependent economies prepare for a prolonged decline in petroleum revenues.
The report argued that early preparation and economic diversification would be critical for countries such as Nigeria as the global energy system moves towards a future in which crude oil plays a smaller role.
