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The economic literature has typically assumed that fossil fuel prices will be negatively affected by climate policies (see e.g., Nordhaus and Boyer, 2000, Hassler and Krusell, 2012, van der Ploeg and Rezai, 2020). For example, the International Energy Agency (2022) estimates that prices will decline as fossil fuel consumption falls by 60 percent until 2050 in a net-zero emissions scenario. The implicit assumption is that the energy transition is driven by a series of negative fossil-fuel demand shocks. Subsidies to electric cars, for instance, cause negative crude-oil specific demand shocks, as oil is substituted with electricity, leading to lower prices.

This paper shows that a declining global fossil fuel production path can also arise from curbing fossil fuel production (i.e., from negative supply shocks), leading to increasing oil prices over the long term. This is in line with theoretical models by Hoel (1994) and Harstad (2012), where oil prices can increase in the face of supply-side climate policies. For example, climate regulation may directly restrict oil production while public preferences may shift in favor of sustainable investment—thereby, increasing the cost of capital for fossil fuels companies and, eventually, lowering oil supply (Delis et al., 2019, Ehlers et al., 2022, Seltzer et al., 2022). Higher policy uncertainty could also lead to a decline in fossil fuel investment (Bogmans et al., 2023). Importantly, as policies are mostly formulated at the country level and the mix between demand side and supply side policies is hard to predict at the global level, the energy transition raises uncertainty about the price outlook.

According to the results of the study, there are interconnected relationships and influences between economic policy uncertainty, environmentally friendly stocks, and petroleum prices in the United States. There is a higher spillover effect from green stocks on oil prices than from oil prices on green stocks. Uncertainty causes more shocks to the stock performance of green stock companies. The influence of fluctuations in oil prices on the level of uncertainty in economic policy carries greater weight than the impact of economic policy uncertainty on the price of oil. When considering external economic factors such as Brent oil prices and uncertainty in global economic policies, the interconnectivity of the system becomes more profound. US oil price-green stock connectedness can also be explained by other economic variables that are outside the economic sphere of the US. Research has discovered that the existence of uncertainty in economic policies intensifies the correlation between the values of green stocks and oil prices, irrespective of the inclusion of Brent crude prices and worldwide economic policy uncertainty. To put it differently, Increased uncertainty in economic policies serves to exacerbate the connection between the two markets.

Renewables are reaching the point where they are outcompeting fossil fuels on price — setting the stage for their predicted dominance of the energy sector by midcentury.

When it comes to the surging demand for new electric generation, wind and solar prices are now the cheapest options almost everywhere, according to the International Energy Agency (IEA).

However, with progressively intensifying international commitments to reduce fossil carbon emissions, both stated and middle-ground climate and energy policies are likely a lower bound in terms of their ambition. Strengthened climate policies and added market penetration from clean energy technologies will severely reduce demand for oil and gas in the global market. At the same time, our findings project that the United States will remain a major producer of oil and gas, particularly given the cost-competitiveness of US gas production and modeled future expansion of the transoceanic LNG trade.

Yet the regional and local economics of oil and gas production across the United States are highly heterogeneous, and this study identifies counties nationwide where current production may become non-competitive over the next two decades as the shrinking market eliminates high-cost producers.

Stranded asset risk is relevant for the energy sector and beyond. Most fossil energy assets are long-lived; they usually require a large initial investment, but have relatively low operating costs. Davis and Socolow (2014) show that expected future cumulative emissions from the existing infrastructure of the global power sector have increased dramatically in the last decades. Such long-term investments have the potential to “lock in” carbon-intensive technologies for a long period of time (Erickson et al., 2015).42 Calculations by IEA (2013) and Pfeiffer et al. (2016) conclude that the “2° capital stock” will already be reached in 2017. Investments in fossil capacities after 2017 are inefficient: they lead to “both larger carbon lock-ins and higher short-term emissions that need to be compensated by deeper emissions cuts in the long run” (IPCC, 2014), increasing the cost of climate change mitigation. Moreover, in order to achieve emission cuts in such a scenario, fossil assets need to be stranded. IEA (2013) provides a conservative estimate that the energy industry faces sunk costs of $ 120 billion due to fossil fuel plants being retired early, even if action to achieve the 2°C goal had started in 2012. For a scenario of delaying climate action until 2030 (and using a different methodology), IRENA (2017a) estimates stranded assets of $ 1.9 trillion in electricity generation, and an additional $ 7 trillion in upstream energy infrastructure (mostly oil production). This is approximately equivalent to 3.5% of global income, and implies a risk not just for the obviously affected energy industry facing sunk costs: international organizations, financial institutions and regulators are increasingly concerned about the “transition risk” of climate policy, especially about a sudden re-pricing of assets.43

A sudden devaluation of energy companies will occur only if expectations were not adjusted in accordance with the risk of asset stranding. Sudden changes in the stringency of carbon policies, or expectations in the presence of tipping points can lead to abrupt repricing of fossil fuel assets. Given energy companies' size and interrelation with the rest of the economy, policymakers may regard energy companies as “too big to fail.” For this and other political economy reasons,44 policymakers may opt for compensation policies, and investors may expect them to do so. Compensations, then, are almost a self-fulfilling prophecy: if they are expected, they will be necessary in order to avoid larger shocks.45 Therefore, understanding the interaction between policy making and investors’ expectations is essential for the design of climate policies. Our results suggest that early and credible commitment to climate policies and whether they involve compensation payments or not is crucial. Such clear signals to financial markets can avoid a disruptive and unorderly energy transition and macro shocks, while directing capital towards climate-friendly technologies. We believe that further research in similar contexts can help to generalize these results, or to identify the important factors in the formation of expectations regarding climate related risks.

Our empirical findings point to a detrimental impact of climate policies, and the associated uncertainty, on investment in the upstream oil and gas industry. A perceived increase in the exposure of oil and gas firms to climate policies has led to a 6.5 percent global decline of their capital expenditures between 2016 to 2019 (i.e., a -1.45 percent annual rate), after controlling for oil market tightness (i.e, spot oil prices), global factors, and other typical firm-level control variables. The investment gap is even more significant relative to the non-energy control group. There is also substantial within-industry heterogeneity with European oil and gas companies being affected the most.

Renewed packages of sanctions from the EU and US were supposed to weaken the Russian economy. Instead, it has adapted, and remains robust just as Vladimir Putin is about to get reelected for a fourth presidential term.

The resilience of the Russian economy is without a doubt a key selling point for President Putin, who's been continuously leading Russia since 1999, either as President or Prime Minister. 

In the two years since Vladimir Putin’s invasion of Ukraine, Russia’s economy has repeatedly defied the doomsayers. A financial collapse, widely predicted in the spring of 2022, never came to pass. The economy fell into recession, but it was less severe than expected and did not last long. Inflation was the most recent scare. Last year prices accelerated rapidly; economists believed they could spiral out of control. Even Mr Putin was worried. In February he urged officials to give “special consideration” to rising prices.

Once again, however, the Russian economy appears to be proving the pessimists wrong. Data to be published on March 13th are expected to show that prices rose by 0.6% month-on-month in February, down from 1.1% at the end of last year. On a year-on-year basis inflation is probably no longer rising, having hit 7.5% in November (see chart 1). Many forecasters expect the rate to fall to just 4% before long, and households’ expectations of future inflation have flattened. The result of Russia’s presidential election, which begins on March 15th, is a foregone conclusion. If it was competitive, these figures would do Mr Putin no harm.

The International Monetary Fund (IMF) expects Russia to grow 3.2% this year, significantly more than the UK, France and Germany.

Oil exports have "held steady" and government spending has "remained high" contributing to growth, the IMF said.

The International Monetary Fund (IMF) expects Russia to grow 3.2% this year, significantly more than the UK, France and Germany.

Oil exports have "held steady" and government spending has "remained high" contributing to growth, the IMF said.

Crude oil prices moved higher today after the U.S. Energy Information Administration reported an inventory decline of 12.2 million barrels for the week to June 28.

The inventory change compared with an inventory build of 3.6 million barrels estimated for the previous week, when the EIA also saw fuel inventories rising, which weighed on oil prices.

MOSCOW, July 3 (Reuters) - Proceeds from oil and gas sales for Russia's federal budget rose by around 41% year on year in the first half of the year 5.698 trillion roubles ($65.12 billion), finance ministry data showed on Wednesday, due to rising oil prices and the weaker rouble.

Oil and gas revenues have been the most important single source of cash for the Kremlin, accounting for around a third to a half of total federal budget proceedings for the last decade.

Brent is the price barometer for ~80% of global crude. As a waterborne crude - with access to global shipping, ports, and storage capacity - it is easily transported around the world. This gives Brent an advantage over landlocked crudes and provides a clear valuation opportunity for commercial and financial traders.

The Brent complex has been evolving for decades. As with the addition of other crude streams to Brent in the past, the addition of Midland WTI is expected to further enhance the Brent complex.

In Hubbert’s time, most of the conventional oil reserves had already been discovered. Hubbert went on to predict that U.S. production would peak in 1969, and it did appear to peak in 1970. World reserves were supposed to peak around 2010 (see figure).

However, about 20 years ago, the industry really leapt forward on the technologies to find oil and to extract it. Particularly fracking.

However, unconventional deposits are primarily those where the oil and gas could not migrate to conventional traps, but are stuck in the very tight and tiny pores and fractures in these tight rocks, mainly shales and tight sandstones, or are not very fluid like heavy oils and tars. The ability to seriously exploit these unconventional reserves did not exist practically before 2000.

Think of conventional versus unconventional oil like jelly donuts versus tiramisu (see figure). Drilling into conventional sources is like sticking a straw in a jelly donut – the petroleum is trapped in a large single formation that just flows out under pressure.

Oil Inches Higher on Softer U.S. Dollar After Biden Drops Out

0742 GMT – Oil prices edge higher on a softer U.S. dollar as investors gauge the implications of President Joe Biden’s decision to drop out of the presidential race. Brent crude is up 0.4% at $83 a barrel, while WTI rises 0.3% to $78.90 a barrel. Both benchmarks are supported by prospects that the U.S. central bank will soon start cutting rates and China’s unexpected decision to cut key rates in efforts to boost growth. “Inflation and labour market data have signaled that disinflation and labour market rebalancing are in place, which we expect will allow the Fed to begin its interest rate cutting cycle in September,” ANZ Research says in a note to clients. Prices are also underpinned by wildfires in Canada, which are threatening about 400,000 barrels a day of oil production, according to analysts. ()

Oil futures ended higher on Wednesday, tallying their first gain in four sessions, after official U.S. data revealed a third weekly drop in a row for commercial crude inventories.

A week-to-week decline in implied gasoline demand reported by the Energy Information Administration, however, highlighted a reduction in fuel consumption during the summer season.

Iraq. Oil revenues fund 90 percent of Iraq’s government budget. Since 2003, the political system has apportioned oil-funded political positions in a quota system based on sectarian affiliation. The choicest positions (in oil and public works ministries, for example) let office holders use state funds to maintain patronage networks that are linked in complex ways to violent sectarian politics and militia groups. In 2020, the collapse of oil revenues punched a $43 billion hole in the state budget and starved the patronage system of funds. The militias lost funding from the state and political parties, slightly shifting a balance of power in favor of nonviolent civic actors. A public protest movement emerged to demand reforms, yet any real window of opportunity appears to have been brief. When violence erupted, it was not among the armed elites, but targeted at civilian leaders of the reform movement. The civic movement’s relative success led to an implicit consolidation of shared interests among violent forces that have the most to lose from a dismantling of the current system of monetized governance.

Nigeria. Nigeria’s oil rents historically provide 65 to 85 percent of government revenue, much of which fuels patronage networks. When COVID-19 and oil market competition dropped prices for Nigeria’s crude by 75 percent last year, the government scrambled for loans to fund an estimated 20 percent gap in the federal budget. Despite President Muhammadu Buhari’s initial calls for austerity measures, budgeted line items increased, suggesting that a substitute for oil-derived patronage funds came from providing payouts from the federal budget. In 2021, new loans are predicted to account for as much as 40 percent of the federal budget. In the longer term, authorities aim to replace oil profits with those from natural gas. Still, evidence suggests that in general, Nigerian elites prefer to cling to the lucrative, immediate profits of the oil business rather than sacrifice those to seek longer-term benefits with other, perhaps less profitable alternatives. Elites are making their choices amid historic levels of public protest, widespread violent turmoil, rising domestic food insecurity and a quickly approaching election season. This leaves open a question about how the elite patronage system will respond to the growing instability.

Sudan. Sudan lost three-quarters of its oil when South Sudan won independence in 2011. As the oil rents withered, the main substitute revenue came from gold mining, which brought in far less money than oil. The decline forced the longtime ruler, President Omar al-Bashir, to cut subsidies for food and commodities that the population had come to expect. Political also switched away from Bashir, who had largely controlled the oil rents, in favor of militias that controlled the gold mines, far from Khartoum. These changes left Bashir particularly vulnerable to dissent — from the top and the bottom — and contributed to his overthrow in 2019.