Diversify or risk unrest, oil producers warned in report | Global development


Oil-dependent international locations that aren’t getting ready to adapt to the worldwide shift away from fossil fuels risk their very own stability, warns a brand new report.

Algeria, Iraq and Nigeria are probably the most weak to “a slow-motion wave of political instability”, in keeping with the risk analysts Verisk Maplecroft.

“With the energy transition accelerating, and Covid-19 levelling out any recovery oil made over recent years, time is running out for a number of countries that have failed to diversify their economies away from exporting fossil fuels,” stated the report, printed on Thursday.

Chad and Kazakhstan had been additionally recognized as international locations with a excessive risk of political upheaval as vitality transition engulfs their economies.

The west African states of Angola, Gabon, Congo, Cameroon and Equatorial Guinea, with “fragile autocratic or semi-autocratic political systems”, had been additionally named as excessive risk by the analysts.

The researchers thought of elements together with exterior breakeven prices, international locations’ capability to diversify and political resilience.

Most oil-producing states did not diversify between 2014, when oil costs plummeted, and the coronavirus pandemic, the analysts discovered. The scenario in some international locations has worsened as exports have dropped and international forex reserves have been depleted.

The scenario is comparable whether or not or not states are members of the Opec oil cartelas most exporters elevated manufacturing to compensate for income shortages. Currency reserves dwindled, as in Saudi Arabia, for instance, which “has burned through almost half of its 2014 dollar stockpile”.

Police in Luanda watch a protest towards the rising value of dwelling and corruption in Angola, one of many oil-producing states the report warns are weak. Photograph: Osvaldo Silva/AFP/Getty

Nigeria and Iraq have already devalued their currencies, in impact “rebalancing their imports and exports at the expense of living standards”.

“Recent devaluations are a harbinger of the bleak options ahead for oil producers: diversify, or experience forced economic adjustments,” the report stated.

Franca Wolf, Verisk Maplecroft’s senior analyst, stated the vitality transition was “critical for the world”, however “a threat multiplier” for international locations reliant on exporting oil with little capability to diversify their economies.

“Standing still won’t be an option for these markets – the game has changed,” she stated. “Political and public pressure to tackle climate change are the main drivers behind energy transition, as we have seen in the climate protest movement and electoral success of green policies in developed economies.”

Among Gulf states, the United Arab Emirates and Qatar had been deemed greatest outfitted to climate the storm. Saudi Arabia and Kuwait are additionally predicted to be extra politically steady, with their sources and economies higher positioned to diversify.

But James Lockhart Smith, Verisk Maplecroft’s head of market risk, additionally raised a caveat over Gulf states. “Authoritarian political stability is anything but stable over the long term and, as lower-for-longer oil prices cut into social spending, additional pressure will pile on these deceptively fragile political systems,” he stated.

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