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Fossil fuel producers under threat

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  • Frederick van der Ploeg

Abstract

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.

Suggested Citation

  • Frederick van der Ploeg, 2016. "Fossil fuel producers under threat," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 32(2), pages 206-222.
    • Handle: RePEc:oup:oxford:v:32:y:2016:i:2:p:206-222.
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    File URL: http://hdl.handle.net/10.1093/oxrep/grw004
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    Cited by:

    1. Tony Addison, 2018. "Climate change and the extractives sector," WIDER Working Paper Series wp-2018-84, World Institute for Development Economic Research (UNU-WIDER).
    2. Malova, Aleksandra & van der Ploeg, Frederick, 2017. "Consequences of lower oil prices and stranded assets for Russia's sustainable fiscal stance," Energy Policy, Elsevier, vol. 105(C), pages 27-40.
    3. Emmanuel Hache & Samuel Carcanague & Clément Bonnet & Gondia Sokhna Seck & Marine Simoën, 2019. "Some geopolitical issues of the energy transition," Working Papers hal-03101697, HAL.
    4. Shimbar, A., 2021. "Environment-related stranded assets: An agenda for research into value destruction within carbon-intensive sectors in response to environmental concerns," Renewable and Sustainable Energy Reviews, Elsevier, vol. 144(C).
    5. Wei Jin & Rick van der Ploeg & Lin Zhang, 2020. "Do We Still Need Carbon-Intensive Capital When Transitioning to a Green Economy?," CESifo Working Paper Series 8745, CESifo.
    6. van der Ploeg, Frederick, 2020. "Race to burn the last ton of carbon and the risk of stranded assets," European Journal of Political Economy, Elsevier, vol. 64(C).
    7. Shimbar, Ali, 2021. "Environment-related stranded assets: What does the market think about the impact of collective climate action on the value of fossil fuel stocks?," Energy Economics, Elsevier, vol. 103(C).
    8. Lyócsa, Štefan & Todorova, Neda, 2021. "What drives volatility of the U.S. oil and gas firms?," Energy Economics, Elsevier, vol. 100(C).
    9. Ansari, Dawud, 2017. "OPEC, Saudi Arabia, and the shale revolution: Insights from equilibrium modelling and oil politics," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 111, pages 166-178.
    10. Cairns, Robert D., 2018. "Stranded oil of Erewhon," Energy Policy, Elsevier, vol. 121(C), pages 248-251.
    11. Rempel, Arthur & Gupta, Joyeeta, 2021. "Fossil fuels, stranded assets and COVID-19: Imagining an inclusive & transformative recovery," World Development, Elsevier, vol. 146(C).
    12. Bebbington, Jan & Schneider, Thomas & Stevenson, Lorna & Fox, Alison, 2020. "Fossil fuel reserves and resources reporting and unburnable carbon: Investigating conflicting accounts," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 66(C).
    13. Jin, Wei, 2021. "Path dependence, self-fulfilling expectations, and carbon lock-in," Resource and Energy Economics, Elsevier, vol. 66(C).
    14. Tony Addison, 2018. "Climate change and the extractives sector," WIDER Working Paper Series 84, World Institute for Development Economic Research (UNU-WIDER).
    15. Clement Bonnet & Samuel Carcanague & Emmanuel Hache & Gondia Seck & Marine Simoën, 2019. "Vers une Géopolitique de l'énergie plus complexe ? Une analyse prospective tridimensionnelle de la transition énergétique," Working Papers hal-02971706, HAL.
    16. Nadezda Pakhomova & Kurt Knut Richter & Viacheslav Zhigalov & Aleksandra Malova, 2017. "Management of Energy-Efficiency in the Context of New Climate Policy," Economy of region, Centre for Economic Security, Institute of Economics of Ural Branch of Russian Academy of Sciences, vol. 1(1), pages 183-195.
    17. Mare Sarr & Joëlle Noailly, 2017. "Innovation, Diffusion, Growth and the Environment: Taking Stock and Charting New Directions," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 66(3), pages 393-407, March.

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