Oxford Energy Podcast – Energy Transition, Uncertainty, and the Implications of Change in the Risk Preferences of Fossil Fuels Investors
Energy transition risk is often viewed as a long-term risk, the impacts of which will not be felt for decades to come. However, this view may not be correct because even though completion of the transition might take decades, the increased uncertainty around the transition impacts the energy markets on a much shorter time scale than the transition itself. In this podcast David Ledesma interviews Rob West, Partner Oil & Energy Research, Redburn & Research Associate at the OIES to discuss his recent paper “Energy Transition, Uncertainty, and the Implications of Change in the Risk Preferences of Fossil Fuels Investors” which he jointly authored with Bassam Fattouh, Director of the OIES and Rahmatallah Poudineh, Lead Senior Research Fellow at the OIES. The podcast discusses how the uncertainties associated with the transition have already started to alter the preferences of investors in fossil fuel projects, especially in oil and coal, dis-incentivising long cycle projects leading to companies adopting lower risk operations models and potentially impacting on the valuations of companies. If capital investment levels fall in specific energy sources such as coal and oil today, it could lead to potential energy shortages with resultant price volatility and higher prices in the future which could drive the pace of the energy transition.