We are seeing a very rough demonstration of the demand crash that might occur in a clean energy transition. It& #39;s only rough because this is faster & has very different causes to a classic climate & #39;stranded assets& #39; scenario.
The price plunge means certain oil or o&g assets (hello US shale) are cashflow negative, *and* their operators are leveraged to the hilt. All this debt means they can& #39;t sit it out for long, and creditors start claiming what& #39;s owed to them.
The creditors might be banks, or bondholders. Private equity funds, who have been big in shale, are also under pressure. Again, it looks like a stranded assets scenario: fossil fuel assets rapidly become worthless, losses to be taken etc.
However...
No-one, creditors/owners/operators, wants to realise those losses! So they play for time. This means navigating through 2 conflicting narratives:
1) some demand will come back, but
2) some of these assets were looking unappealing even in a non-COVID scenario
Now onto *climate*:
It makes no difference to the atmosphere who owns oil & gas assets, how much they are currently valued at, or who made or lost money. All that matters is how much CO2 and methane gets into the atmosphere.
If they& #39;re cheap, however, they can be cheaply bought and shut down, right? In theory, yes - but who could or should buy it? Philanthropists in theory could buy some up. But unless they can negotiate big writedowns on the debt, it& #39;s just too expensive.
(I estimated the Bakken shale emissions per barrel using this terrific resource - http://oci.carnegieendowment.org/ ">https://oci.carnegieendowment.org/">... - which the great @jgkoomey was involved in creating!)
This is where it starts to get into relationship between physical oil production & financial assets. Which is a massive topic in itself. I will have to return to this thread later...
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