Falling global oil prices, which have not risen above $50 since early January, continue to defy pundits. Now oil-producing countries are bracing themselves for an extended low-price scenario. The dramatically changed outlook is boosting growth forecasts across much of the industrialized world, but in other corners — where states have become increasingly dependent on oil revenues — the good times are over.

Many of those producing countries with less-developed institutions have managed to sustain a "fragile stability" while buoyed by an unprecedented flow of petrodollars since 2000. However, the impact of the sudden loss of revenue over coming months will lay bare the failures of policymakers in turning oil wealth into shared prosperity.

Putin's good timing

Many emerging economies are enjoying the boost allowed by cheaper fuel — notably Asian economies like China, India and Indonesia, but also the United States. The World Bank has forecast growth of 3.2 percent for the U.S. economy in 2015 compared to 2.4 percent last year, as lower fuel costs help out manufacturers and households. In fact, American households are set to save $550 each over 2015.

However, there is another group of countries where the outlook is more bleak.

The decade from 2004 to 2014 was a good one to be in charge of a petro-state. Leaders like Hugo Chavez and Vladimir Putin stacked up sky-high popularity ratings on the basis of global geopolitical movements they had little control over and can take no credit for. But now many of those same leaders are holding crisis meetings to discuss how to plug the gap — often of multiple billions — in their budgets after a 60 percent drop in oil revenues.

Some large-scale vanity projects — ambitious infrastructure projects with dubious economic viability — can be deferred, but other measures are likely to target ordinary citizens. They might include cuts to social and educational programs, subsidies and public-sector pay, and increases in taxation.

What's more, the depreciation of national currencies in countries like Russia and Kazakhstan is hurting the private sector, exports and financing, and leading to job cuts as countries drop into recession.

How petro-states avoided the Arab Spring

When oil prices are high, petro-states need only to expand social spending to ensure an obedient populace and placate political opponents. However, while a government may squander revenues on patronage networks or populist politics when the treasury is overflowing, now those networks are being starved of the funds that have helped to keep regimes stable and free of political contention.

It may help to look back at the recent history of mass social unrest since oil prices began their upward trajectory in the early 2000s. The Colour Revolutions that spread across the former Soviet Union took root in countries with few oil resources — Georgia, then Ukraine and Kyrgyzstan — rather than oil and gas powerhouses such as Kazakhstan, Azerbaijan or Turkmenistan.

It is also no accident that in 2011 the Arab Spring revolutions gathered momentum in Tunisia, Egypt and Syria, which have minimal oil production, rather than the oil-rich Gulf nations of Saudi Arabia, Qatar or Kuwait. Libya is admittedly something of an outlier, largely because of NATO intervention.

The same freedoms of expression and association that formed the core of these protest movements were, and still are, restricted in many of their oil-producing counterparts. However, fledgling copycat protests in Kazakhstan and Bahrain never succeeded in turning into a "Kazakh spring" or a "Bahrain spring."

This was largely due to oil revenues. Ultimately, people are willing to put up with restrictions on their freedoms if they are compensated with the small portion of oil revenue that trickles down into salaries, rents and public services.

The billion-dollar question: How to fill the budget gap

I am not forecasting any immediate social implosion, other than perhaps in near-bankrupt Venezuela. Most countries will be able to stumble on for a year or two, using a range of sources to fill the budget gap left by oil revenues. Deutsche Bank has estimated that Saudi Arabia needs oil at over $104 to break even in 2015, but a foreign reserves buffer of $900 billion should provide a cushion for three years at current spending levels.

The first recourse is likely to be dipping into oil-derived sovereign wealth funds. A wave of sovereign oil funds has been established by producing nations on the Norwegian model, as a way to insulate the oil wealth from budgetary demands and protect it for future generations.

However, without strong democratic institutions, accountability and rule of law like those in Norway, these funds can easily be abused and are likely to run dry. When Nigerian crude output fell in 2013, funds in its Excess Crude Account (ECA) fell from $10 billion to $5 billion.

Institutions are key in translating oil wealth into prosperity, and their weakness is a symptom of the "resource curse." This "curse" is the curious phenomenon whereby a wealth of natural resources leads not to improved development outcomes but, with rare exceptions, to authoritarianism, economic instability and corruption.

Fuel subsidies and taxes

Economists have called on governments to capitalize on low fuel prices to eliminate the $600 billion spent on fuel subsidies per year, which are proven to benefit the wealthiest rather than the poorest, who they are supposedly designed for.

Energy importers India and Indonesia have already acted, but exporters are unlikely to take the bait. They need only think back to the violent experiences of Venezuela's violent "Caracazo" riots in 1989 or Nigeria's short-lived attempt to reduce their subsidy bill in 2012, sparking protests that brought the country to a standstill.

The problem is one of perception. For many citizens of petro-states, the only tangible benefits that "trickle down" to them come in the form of cheap fuel. In the absence of broad-based development, efficient and accessible social services and large-scale job creation, they understandable cling to this minimal state largesse, and do not take kindly to its disappearance.

For the first time since the latest oil boom began, petro-states are finally having to think about tax. That brings important implications for the social contract between a state and its citizens.

When citizens are taxed, they enter into a bargain with the state. As a result, they demand to know more about how their money is being spent on their behalf. When a state discovers oil — akin to winning the geological lottery — a state has no such accountability to its oil wells.

Therefore, when a government resorts to taxation to compensate for a budget shortfall, it is forced to re-enter into that bargain with its citizens, allowing opportunities for mobilization by disillusioned taxpayers. In the longer term, this too is a threat to oil-based regimes.

The oil-conflict nexus

The propensity of oil-dependent states toward violent conflict is another long-discussed consequence of the "resource curse." It has been pointed out that lower oil prices reduce the risk of outright "natural resource conflicts" simply because wars are expensive. But in 2015, oil prices may act in other ways to threaten security.

Let's take a look at Nigeria, often cited as a prime example of the "resource curse" and a state facing growing bloodshed by Sunni extremist group Boko Haram, who massacred hundreds of civilians in Baga in January. It would be foolish to suggest a direct link between oil prices and Boko Haram attacks, but they are by no means unrelated.

Firstly Nigeria's leadership, already losing territory in Borno state to the Islamic militants, is now left with far fewer resources to stop the conflict gathering momentum. But secondly — and more importantly — the Nigerian state is riddled with corruption and outright theft of oil (amounting to 10 percent of production), and it has run out of time to use its oil wealth to alleviate poverty and build inclusive institutions.

It is no accident that Boko Haram arose in the impoverished Northeast; as Dr. Nafeez Ahmed reminds us, "Poverty and inequality is a recruiting sergeant for Islamist terror."

The concentration of conventional oil reserves in unstable regions such as the Middle East and West Africa means that we may see more such movements arising. The potential for those movements to strengthen is a threat that will not be contained within the borders of producing countries themselves.

Failed promises

The global shock induced by oil price movements since June 2014 can make us feel we have been hit by a natural disaster, rather than an ultimately predictable shift in a notoriously volatile market. But the fact remains that if your country lies on tectonic fault lines, it would be irresponsible to fail to build earthquake-proof housing.

The coming years will shed light on the failures of policymakers in oil-dependent states to plan beyond the boom and convert oil revenues into strong foundations for future growth.

Dizzy with seemingly unlimited rises in their main export, countries like Nigeria and Russia have not followed through on promises to diversify their economies away from oil. Nor have they used oil revenues to invest in the human capital and provision of education required to build a post-oil economy on value-added, knowledge-based industries.

However much industrialized economies may rejoice at lower fuel costs, the consequences of instability in oil-producing regions, and its global consequences, should concern us all.