The global energy transition needs to happen fast, but the consequences for countries dependent on oil exports for much of their revenue would be catastrophic. Big rich countries like Saudi Arabia can diversify. They’re building a big plant to make green hydrogen. Russia too has a large, diversified economy. Norway has a huge sovereign fund. Iraq, however, tops the list of countries which derive most of their revenue from the export of oil and gas, getting 90% of its GDP from oil exports. Other countries facing steep declines in national budgets include Libya, Venezuela, Equatorial Guinea, Nigeria, Iran, Guyana, Algeria, Azerbaijan, and Kazakhstan. Government services, subsidies, and employment will have to be curtailed. That bodes popular unrest as cuts hit home. Regimes that can well manage the shrinkage and the turmoil it creates will survive. Those that don’t, won’t. Venezuela is a harbinger if what to expect: shortages of many goods in shops and markets, including food staples and most imported items, an increasingly desperate citizenry, and massive emigration.
Now imagine the turmoil that multiple Venezuelas would cause. There are 40 countries that export over $1 billion in oil and gas annually. Some will be able to handle cutting that revenue in half within a decade; many won’t. As the energy transition gains momentum, demand for oil and gas will fall, and so will the price of oil, further eroding revenues. The value of proven reserves will also decline, further undercutting oil-producing countries and companies.
Bankrupt countries don’t disappear, but their citizens face deprivation and misery. The Paris Agreement called for members to contribute $100 billion yearly to a fund to help poor countries make the break from fossil fuels to clean energy. Donations to the fund have fallen way short, while the realization has grown that the cost of the transition will be far higher than anticipated. Will the G7 step up? To some extent, yes, but the rich countries face transitioning their own energy systems, so will be constrained from providing the vast sums needed. For oil importers, as the transition proceeds, energy expenditures will decrease, freeing up capital to speed the switch and to support oil exporters. Debt levels will exceed all previous records, leading both to inflation and defaults. Modern monetary theory (MMT), which asserts that because sovereign countries can print money, debt doesn’t matter if the money is spent productively, will get a thorough test of its validity.
This decade and the two to follow will be highly volatile, with stresses that will roil social, political, financial, and economic realms. There will be serious ramifications for the stability of the international order and indeed for the very viability of a civilization based on almost 200 sovereign nations plus many more stateless ethnicities; on an economic system, capitalism, that pursues continual short-term growth through the exploitation of natural resources, animal, vegetable, and mineral. However, we are learning that those resources are finite, and that we cannot continue to exploit them as if they were infinite if we are to preserve a habitable Earth.
If we humans are to survive, both sovereignty and capitalism must adapt. Nation states must cede some degree of sovereignty in recognition that everyone inhabits the same habitat, the Earth, where all boundaries are artificial; that divisions, while important, pale when compared to our commonality; we are all humans, we are all Earthmen.
Ethnic groups must aspire not to nationhood but to an appreciation that their cultural identity has equal validity to that of other nationalities and ethnicities; to a recognition of the brotherhood of man. Capitalism must accommodate the limits of growth and evolve into a sustainable circular economy. This will require that we develop an understanding of the interdependency of all life, and a new reverence for all forms of life that make Earth their home. We must all live together on the planet we share, or most forms of life will become extinct.
Can we do it? Can we use our big brains to adapt to new realities, or will we be held captive by old, outmoded ways of thinking, acting, and being that condemn us to repeat past mistakes and follies leading us only to our own demise? The energy transition from fossil fuels that are making the Earth unlivable to carbon-free, limitlessly renewable energy sources is a test, a big one, of our ability to adapt to new circumstances and challenges. However, it is only the first of many that we must pass if we are to resolve the climate crisis and evolve a sustainable single global civilization that will endure and flourish not for years, decades, or centuries, but for millennia.