{"id":29691,"date":"2022-05-26T00:45:00","date_gmt":"2022-05-26T00:45:00","guid":{"rendered":"https:\/\/www.lifeandnews.com\/articles\/?p=29691"},"modified":"2022-05-30T04:22:20","modified_gmt":"2022-05-30T04:22:20","slug":"who-really-owns-the-oil-industrys-future-stranded-assets-if-you-own-investment-funds-or-expect-a-pension-it-might-be-you","status":"publish","type":"post","link":"https:\/\/www.lifeandnews.com\/articles\/who-really-owns-the-oil-industrys-future-stranded-assets-if-you-own-investment-funds-or-expect-a-pension-it-might-be-you\/","title":{"rendered":"Who really owns the oil industry\u2019s future stranded assets? If you own investment funds or expect a pension, it might be you"},"content":{"rendered":"\n

Gregor Semieniuk<\/a>, UMass Amherst<\/a><\/em> and Philip Holden<\/a>, The Open University<\/a><\/em><\/p>\n\n\n\n

When an oil company invests in an expensive new drilling project today, it\u2019s taking a gamble. Even if the new well is a success, future government policies designed to slow climate change could make the project unprofitable or force it to shut down years earlier than planned.<\/p>\n\n\n\n

When that happens, the well and the oil become what\u2019s known as stranded assets<\/a>. That might sound like the oil company\u2019s problem, but the company isn\u2019t the only one taking that risk.<\/p>\n\n\n\n

In a study published May 26, 2022<\/a>, in the journal Nature Climate Change, we<\/a> traced<\/a> the ownership of over 43,000 oil and gas assets to reveal who ultimately loses from misguided investments that become stranded.<\/p>\n\n\n\n

It turns out, private individuals own over half the assets at risk, and ordinary people with pensions and savings that are invested in managed funds shoulder a surprisingly large part, which could exceed a quarter of all losses.<\/p>\n\n\n\n

More climate regulations are coming<\/h2>\n\n\n\n

In 2015, almost every country worldwide signed the Paris climate agreement<\/a>, committing to try to hold global warming to well under 2 degrees Celsius (3.6 F) compared to pre-industrial averages. Rising global temperatures were already contributing to deadly heat waves<\/a> and worsening wildfires<\/a>. Studies showed the hazards would increase<\/a> as greenhouse gas emissions, primarily from fossil fuel use, continue to rise.<\/p>\n\n\n\n

It\u2019s clear that meeting the Paris goals will require a global energy transition<\/a> away from fossil fuels. And many countries are developing climate policies designed to encourage that shift to cleaner energy.<\/p>\n\n\n\n

But the oil industry is still launching new fossil fuel projects, which suggests that it doesn\u2019t think it will be on the hook for future stranded assets. U.N. Secretary-General Ant\u00f3nio Guterres called a recent wave of new oil and gas projects<\/a> \u201cmoral and economic madness<\/a>.\u201d<\/p>\n\n\n\n

\"Teenagers
Much of the stranded asset risk falls on individuals. Kirill Kudryavtsev\/AFP via Getty<\/a><\/figcaption><\/figure>\n\n\n\n

How risk flows from oil field to small investor<\/h2>\n\n\n\n

When an asset becomes stranded, the owner\u2019s anticipated payoff won\u2019t materialize.<\/p>\n\n\n\n

For example, say an oil company buys drilling rights, does the exploration work and builds an offshore oil platform. Then it discovers that demand for its product has declined so much because of climate change policies that it would cost more to extract the oil than the oil could be sold for.<\/p>\n\n\n\n

The oil company is owned by shareholders. Some of those shareholders are individuals. Others are companies that are in turn owned by their own shareholders. The lost profits are ultimately felt by those remote owners.<\/p>\n\n\n\n

In the study, we modeled how demand for fossil fuels could decline if governments make good on their recent emissions reduction pledges and what that would mean for stranded assets. We found that $1.4 trillion in oil and gas assets<\/a> globally would be at risk of becoming stranded.<\/p>\n\n\n\n

Stranded assets mean a wealth loss for the owners of the assets. We traced the losses from the oil and gas fields, through the extraction companies, on to those companies\u2019 immediate shareholders and fundholders, and again their shareholders and fundholders if the immediate shareholders are companies, and all the way to people and governments that own stock in the companies in this chain of ownership.<\/p>\n\n\n\n

\n