Participants in a role-playing exercise who take on the role of countries facing a fall in global oil demand find that declining need for fossil fuels will cause disorder across international markets unless there is coordinated action towards a stable oil endgame.

“What we think is very unique about this exercise is that we make policymakers and experts actually step into the shoes of producer governments,” said Charlotte Liebrecht, a researcher for E3G’s energy transition team, in a recent webinar. That first-hand experience demonstrated “the complexities of the transition, going far beyond simply deciding whether or not to move away from oil.”

A recent report, co-authored by Leibrecht, describes results of an interactive Oil EndGame simulation designed by E3G to forecast how countries might respond to different transition scenarios. The simulation places participants in the role of decision-makers for eight oil-producing countries—Brazil, Norway, Russia, the United Arab Emirates, Saudi Arabia, Angola, and Nigeria—who must then respond to falling oil demand across three scenarios:  a rapid transition, a messy transition, and a slow transition during the years 2028-2040.

The participants must make decisions while pursuing national priorities, taking investment decisions, and expanding geopolitical influence—an exercise that E3G says “allows participants to experience the constrained policy space and persistent trade-offs faced by producers.”

After running the simulation with more than 100 participants from governments, international institutions, academia, and civil society, the climate change think tank says it has discerned patterns in how decision-makers might respond to declining oil demand in the real world.

The simulations’ common pattern shows that without alternatives to oil production, uncertainty about future demand and revenues is likely to result in a disorderly endgame, where oil-producing countries make near-term decisions that make the larger problem worse. These include reactions like maximizing revenue, expanding output, and locking in buyers and transactional geopolitical deals, all of which can result in a range of bad outcomes, as competition consolidates market control to stronger countries and reduced revenues lead to instability and a rise in migration.

But a more orderly endgame is possible when oil-producing governments are able to find alternatives for maintaining their economies, such as improved access to both oil and alternative energy markets and transition financing, investment for diversification, and clearer signals from the major importing countries that drive oil demand.

“Where participants saw viable alternative development pathways, they pursued cooperative strategies; where alternatives were absent, they maximized extraction and pursued geopolitical bargains,” the report states—though it also warns that there are no pathways that can guarantee stability. They can only make a stable transition more likely.

The report’s recommendations call for coordination and communication: from major oil importers, to be more clear about future projections; from financial institutions, to more fully treat declining hydrocarbon revenues as a financial risk; and from climate diplomacy, to move beyond “negotiating the language of phaseout” to also managing instability created by declining oil demand.

Leibrecht noted that none of these recommendations call for slowing the transition, and the report emphasizes that the speed of the decline is less likely to drive the risk to oil producers than the disorder of the transition.

“The strategic choice governments have here is really [whether] they want to manage the pressures in advance—through finance, diplomacy, and economic adjustments—or else they will be left to deal with them later, but then it will be through bailouts, price shocks, and security crises.”