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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, 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. 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.
    2. Ansari, Dawud, 2017. "OPEC, Saudi Arabia, and the shale revolution: Insights from equilibrium modelling and oil politics," Energy Policy, Elsevier, vol. 111(C), pages 166-178.
    3. Cairns, Robert D., 2018. "Stranded oil of Erewhon," Energy Policy, Elsevier, vol. 121(C), pages 248-251.
    4. Rick can der Ploeg, 2017. "Race to Burn the Last Ton of Carbon and the Risk of Stranded Assets," OxCarre Working Papers 201, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
    5. Rick van der Ploeg, 2017. "Race to Burn the Last Ton of Carbon and the Risk of Stranded Assets," CESifo Working Paper Series 6793, CESifo Group Munich.
    6. Tony Addison, 2018. "Climate change and the extractives sector," WIDER Working Paper Series 84, World Institute for Development Economic Research (UNU-WIDER).
    7. Mare Sarr & Joƫlle 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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