Algeria Wakes Up to a Looming Crisis

I am pleased to inform you that ENI’s quarterly OIL magazine has just published an article I authored under the Editor’s title “Algeria: The Threat of a Possible Crisis”. The theme of the magazine’s issue is about “Winners & Losers” in the context of the current oil price collapse.

The following is a quoted excerpt from the introduction and conclusions of the article. For any further reproduction or republication of part or all the article, please contact Gianni Di Giovanni, the Editor in Chief of the magazine. You may also wish to freely subscribe to OIL, which provides authoritative analysis of current trends in the world of energy, with particular attention to economic and geopolitical developments (www.abo.net).

Prime Minister Abdelmalek Sellal’s ominous statement early this year that Algeria “faces a crisis” does not forebode well for the nation’s outlook. He and his government seem to have suddenly woken up to the real dimensions of the global oil market collapse. The sharp fall in prices, which was mainly caused by a supply shock from the growth momentum in North American unconventional oil production, then aggravated by OPEC’s unwillingness to mitigate it, is likely to overwhelm government’s ability to respond. Already in the benign environment that prevailed before prices spiraled downward, the government could hardly cope with a myriad of socio-economic problems. As Algeria’s woes could worsen, the financial resources saved during past oil market uptrends might not be sufficient to help deal with the most urgent challenges.

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As Algeria’s economic prospects remains closely bound to the state of its hydrocarbon sector, the collapse of oil prices has served as a strong reminder of the country’s extreme vulnerability. In the current critical context, neither the available fiscal buffer nor the new framework for attracting FDI in the hydrocarbon upstream sector, would entirely overcome the heightened challenges the country faces, including funding expansionary budgets and moving forward the process of recovery in the oil and gas industry. Furthermore, the government does not seem to have a realistic grasp of the threats and challenges from a new, unpredictable opposition that its inconsistent policies and lack of participation have provoked. Favoring participation requires a significant change in the Algerian policy-making mindset. This mindset, which has been shaped by old experiences and traditional ways of identifying problems and devising policies, is far too rigid to effectively deal with the challenges – and indeed the opportunities – that lie ahead. Challenges will hardly lead to opportunities without an informed public debate and the articulation of a coherent, credible, and consensual vision to steer the country out of a looming crisis and lead it in a more viable direction.

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