Guyana, a former British colony with a population of 786,000, already struggles with political instability and ethnic tensions. Earlier this year, in the first national election held since oil was discovered, accusations of corruption prompted a recount and an unclear presidential result. The transfer of power dragged for five months, leading to deep uncertainty, violence and eventually US sanctions. Guyana is not the only oil-production nation facing an unexpectedly harsh political and economic reality. Iraq, which experienced massive unrest in 2019 that led to a change in government, is expected to become a debtor nation this year, as low oil prices and high budgetary needs are forcing it to deplete its entire US$ 62 billion nest egg. Nigeria’s looming debt – which it needs high oil prices to service – will make it harder for the government to fight the terror group Boko Haram.
The pandemic has essentially created a self-fulfilling economic prophecy for some oil nations. Low oil prices mean governments must cut the budget of their national oil company to meet other more pressing fiscal, social and health needs. That will translate into less future oil production, which, in turn, further lowers the oil revenues these places depend on. But surviving this year’s low oil prices is only the beginning. To thrive in the long term, Guyana will need to sink much of its oil earnings into building other sectors to avoid overdependence on one volatile source of revenue. This is especially key in a world that’s moving away from oil as its main energy source.