What are 'stranded assets' in oil and gas?
Quick Answer
Stranded assets are fossil fuel reserves or infrastructure that become uneconomic to use before the end of their expected life—either due to climate policy, competition from alternatives, or demand decline. The Carbon Tracker Initiative estimates trillions in potential stranded assets. This risk shapes investment decisions, though debate exists about timing and magnitude.
Key Numbers
Full Analysis
In-depth exploration with citations and evidence
What Gets Stranded#
Reserves
Oil and gas in the ground that:
- Costs too much to extract if prices fall
- Becomes unburnable under carbon budgets
- Faces regulatory barriers
Infrastructure
Physical assets that become obsolete:
- Refineries without demand
- Pipelines with no throughput
- Power plants forced to close
- Drilling equipment unused
Why Assets Strand#
Demand Decline
- Electric vehicles reducing gasoline demand
- Renewable electricity replacing gas power
- Efficiency reducing overall energy need
Climate Policy
- Carbon pricing making production uneconomic
- Regulations limiting new development
- Mandates forcing alternatives
Competition
- Solar/wind cheaper than gas power
- EVs cheaper than gasoline cars
- Alternative fuels emerging
Stranding Scenarios#
| Scenario | Stranding Risk |
|---|---|
| Business as usual | Minimal |
| Announced Pledges | Moderate |
| Net Zero by 2050 | High |
| 1.5°C Pathway | Very High |
Who Bears the Risk#
Companies
- Write-down asset values
- Reduced investor confidence
- Bankruptcy in extreme cases
Governments
- Lost royalty revenue
- Cleanup liability
- Economic disruption
Workers
- Job losses
- Community decline
- Pension funding issues
Managing the Risk#
Smart investors and companies are:
- Stress-testing portfolios against transition scenarios
- Prioritizing low-cost, low-carbon production
- Diversifying into clean energy
- Shortening investment time horizons
Steelmanned Counterarguments
We present the strongest version of opposing viewpoints—not strawmen.
1Stranded assets are an activist fabrication.
The risk is real—ask coal investors. However, timing and magnitude are uncertain. Oil assets may not strand if demand persists longer than aggressive scenarios assume. It's a risk to assess, not an inevitable outcome.