The Impact of Low Oil Prices on Algeria

Lead PI: Gonzalo Escribano

Unit Affiliation: Center on Global Energy Policy (CGEP)

October 2016 - Ongoing
Asia ; Africa ; Europe ; Middle East ; North Africa
Project Type: Research Outreach

DESCRIPTION: In a new report by the Center on Global Energy Policy, author Gonzalo Escribano outlines the degenerating security conditions in Northern Africa, raising concerns about the ability of Algeria, an OPEC nation, to weather the resulting economic, political and security shocks, and inviting comparisons between the current situation and the catastrophic events experienced by the country during the 1986-1988 oil price collapse and its aftermath. The paper goes on to discuss the extent to which low oil prices could foster an environment for economic and political reforms, and the benefits that the international community, specifically Europe, could derive from taking advantage of this moment in time to press for new energy policies that improve both supply and overall security.

OUTCOMES: Key Findings:
- There are clear parallels and key differences between what Algeria is going through now and the chain of events that led to the bloody civil war of the 1990s. Algeria is better equipped altogether to weather a market downturn today than it was 30 years ago.
- Despite the decline in oil and gas revenues, the Algerian economy has continued to grow during the current low price environment and has been able to avoid an economic recession like the one experienced in 1986-1988.
- While a military coup or widespread popular unrest thus seem unlikely in the near term, Europe should nevertheless take note of the risk over the longer term of greater instability along its southern border. The EU should look for ways to engage with Algeria that would benefit not only their mutual energy security but also prevent the creation of further unrest in the region.