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STRANDED ASSETS AND SOVEREIGN STATES

Published online by Cambridge University Press:  05 February 2020

Amy Myers Jaffe
Amy Myers Jaffe*
Affiliation:
Council on Foreign Relations, New York. E-mail: ajaffe@cfr.org
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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.

Keywords

oilclimatestranded assetstransitioninnovationstrategy.Q35Q55L1.
Type
Research Article
Information
National Institute Economic Review , Volume 251 , February 2020 , pp. R25 - R36
Copyright
© National Institute of Economic and Social Research, 2020

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