A global shift away from oil is expected to trigger significant conflict, migration, and economic instability unless governments take urgent action to support the most vulnerable countries, according to new research. Nations highly dependent on oil revenues for public services, such as Nigeria, Iran, Angola, and Algeria, face particularly severe risks due to limited economic diversification and scarce financial resources to absorb the transition’s shocks.
The study, conducted by the E3G think tank and released on Tuesday, highlights that worldwide demand for oil is projected to peak in the early 2030s and subsequently plateau or decline. This shift reflects the accelerating growth of renewable energy sources and geopolitical disruptions, including the Iran war, which has tightened supply and led to soaring prices, inflation, and political unrest in some regions.
As oil demand contracts, producing countries will compete for a shrinking market. Those with abundant, low-cost production capabilities — such as Saudi Arabia and the United Arab Emirates — are expected to maintain an advantage over producers with higher costs and less advanced infrastructure. The report warns that countries facing economic collapse, exemplified by Venezuela’s ongoing crisis exacerbated by natural disasters and political instability, serve as cautionary tales for others heavily reliant on fossil fuels.
Beth Walker, co-author of the report, said governments are largely unprepared for the fiscal and security challenges that will arise. “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,” she stated.
Despite these concerns, the authors emphasize that delaying the energy transition is not a viable option due to the urgent need to address climate change. Maria Pastukhova, also a co-author, cautioned that a “slow but chaotic transition can be just as destabilizing as a fast one.”
The report, developed over two years with input from more than 100 public officials and experts, notes that oil revenues currently account for over 40% of government income in 17 countries. In Iraq and Libya, oil generates between 70% and 90% of state revenues. The forecast anticipates dramatic declines from 2030 onward, with Algeria facing up to an 87% drop and Nigeria more than 60%. Algeria’s geographic proximity to Europe and heavy reliance on EU markets amplify its vulnerability.
These revenue shortfalls are expected to undermine basic public service provision and exacerbate social unrest. Rising debt burdens compound the problem; Angola and Mexico, for example, already allocate over a quarter of their government revenues to debt servicing. Walker warned that the repercussions will be multifaceted: “It’s a series of national fiscal crises that could turn into very different security problems — unrest and migration in Algeria; a more fragile settlement in Iraq with regional spillover; diminished state capacity in Nigeria affecting broader African stability; and military competition over oil infrastructure in Libya with heightened risks for Europe.”
Addressing these challenges requires coordinated international efforts, involving institutions such as the International Monetary Fund, World Bank, financial sectors, and national governments. Pastukhova stressed the need for better communication and alignment among major oil-importing nations. “Adjustment must be integrated not only into development assistance or climate policy but also into foreign and economic security strategies,” she explained.
Looking ahead, China’s declining oil consumption due to widespread electric vehicle adoption has shifted demand dynamics, while India’s future trajectory remains uncertain. India’s energy choices could become critical to determining whether global oil demand decreases sufficiently to mitigate severe climate impacts.