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Stranded Assets And Sovereign States

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  • Jaffe, Amy Myers

Abstract

There is evidence that the risk of stranded assets in the oil and gas sector is underpriced in financial markets. Publicly traded Western oil and gas companies are starting to write down assets, opening up the possibility that more rationalisation of value is likely to come. To the extent that large oil companies diversify portfolios to include cleaner energy and carbon sequestration technologies, it could reduce the risk of a sudden cascading change in the stock valuation of these firms and related bond and credit markets. Instead, the vast majority of oil and gas assets that will be stranded are in the control of sovereign states whose national budgets are highly dependent on oil and gas revenues. Thus, the problem of stranded asset risk for the oil and gas sector may be most relevant in markets for sovereign credit as well as risks that go beyond financial losses.

Suggested Citation

  • Jaffe, Amy Myers, 2020. "Stranded Assets And Sovereign States," National Institute Economic Review, National Institute of Economic and Social Research, vol. 251, pages 25-36, February.
    • Handle: RePEc:cup:nierev:v:251:y:2020:i::p:r25-r36_7
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    Cited by:

    1. Agarwala, Matthew & Burke, Matt & Klusak, Patrycja & Mohaddes, Kamiar & Volz, Ulrich & Zenghelis, Dimitri, 2021. "Climate Change And Fiscal Sustainability: Risks And Opportunities," National Institute Economic Review, National Institute of Economic and Social Research, vol. 258, pages 28-46, November.
    2. Shafiqul Hassan & Yusuff Jelili Amuda & Mohsin Dhali & Saghir Munir Mehar, 2023. "Contract Structure of Production Sharing Agreement by International Oil Company in Exploration of Petroleum Resources in Developing Countries," International Journal of Energy Economics and Policy, Econjournals, vol. 13(3), pages 7-14, May.

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