Oil at $100 a barrel promises boon for Africa’s largest country

Algerian authorities were thrown a lifeline after Russia’s full-scale invasion of Ukraine sent energy prices soaring; now there’s hope that the rise in oil prices driven by the war in Iran will offer another.

The North African nation of 47 million people has long relied on some of the continent’s largest oil and gas reserves to pay for many of its subsidies, and since being clobbered by the 2014 price crash, it has found it increasingly hard to fund its budget.

To help cover spending — projected to rise to 7.69 trillion dinars ($58.5 billion) in 2026, around 5% more than in 2025 — the government has undertaken its first local sale of sovereign Islamic bonds and has sought to tap an African Development Bank loan for infrastructure.

Then oil smashed through $100 per barrel on March 9, for the first time since Russia’s invasion, and although they have yo-yoed since then, prices remain up by more than 50% as fears grow that the conflict will hinder supplies from the Middle East.

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With Algeria’s budget based on an oil-market price of $70 per barrel, Minister of Hydrocarbons and Mines Mohamed Arkab has said anything between that and $80 per barrel would be “a balanced price.”

“The rise in prices can only be a good thing,” said Mahfoud Kaoubi, an independent economic and financial analyst in Algiers, the capital. “We were facing a real financing problem.”

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If oil shoots up  further — closer to the $120-$125 range — the Opec producer would be able to balance its books, according to Kaoubi. Algeria currently pumps about 977 000 barrels a day.

Just over 40% of planned expenditure for this year will cover allocations such as state-employee salaries, pensions, unemployment benefits and subsidies for key goods including cereals, fuel, milk and desalinated water — all seen as key to maintaining social peace.

Back in 2022, when Russian President Vladimir Putin attacked Ukraine, Europe turned to Algeria to help secure its energy supply. It had gas to spare after diplomatic spats with Morocco and Spain over the Western Sahara territory escalated into a halting of trade and exports.

Algeria’s foreign exchange reserves began to recover, and the country recorded trade surpluses and stronger external accounts.

But the reprieve was short lived. Foreign reserves fell to $47.1 billion in October from more than $66 billion at the start of 2025, according to data compiled by the International Monetary Fund, which projected the funds would reach critical levels this year.

“Ultimately, the energy price impact of the Iran war – whether it is short or long – is not a panacea for Algeria’s long-term need for economic diversification away from reliance on oil and gas,” said Hamish Kinnear, a MENA analyst at Verisk Maplecroft’s Global Risk Insight team.

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Algeria ranks 15th out of 193 countries tracked on the thinktank’s Dependence on Fossil Fuel Exports Index, which measures a country’s overreliance on such revenue.

“The longer-term picture for Algeria’s oil and gas production alongside its domestic consumption means it is likely that more revenue raising measures will be needed in the years to come,” Kinnear said.

For now, as some of the pressure eases in Algiers, Kaoubi said authorities should remain prudent given threats to global inflation. Algeria imports around $50 billion a year, including food, vehicles and machinery.

“What we can get with one hand, we can lose with another,” he said. “There is a risk that we see prices rise on the international market, which will impact the cost of imports.”

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