Tuesday, May 17, 2016

New OxCARRE research: Fossil fuel producers under threat

Rick van der Ploeg writes on

Fossil fuel producers under threat
Oil and gas producers face three threats: prolonged low oil and gas prices, tightening of climate policy and a tough budget on cumulative carbon emissions, and technological innovation producing cheap substitutes for oil and gas. These threats pose real risks of putting oil and gas producers out of business. They lead to the problem of stranded assets and a significant downward valuation of oil and gas producers. This calls for divesting from and shorting coal, oil, and gas. The economies of oil- and gas-rich countries are typically in a deplorable state, since they did not use their past windfalls to build up buffers and invest in a diversified economy. More rapacious depletion of their oil and gas reserves will not help. After the crash in oil and gas prices these countries are facing serious problems and it is difficult to see how they will cope with the outlined threats.
Published in Oxford Review of Economic Policy, available here [oxrep.oxfordjournals.org].

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