Climate change is one of the most discussed topics all over the world. It won’t be easy to solve this issue in a short period of time. As a reminder, the oil industry is crucial for many countries. According to a new report, oil and gas producing countries face a multi-trillion-dollar hole in their government revenue. It is no secret that in the case of many countries, it won’t be easy to cope with this challenge.
It is worth mentioning that the report prepared by think-tank Carbon Tracker contains many interesting details. For example, some countries could-lose at least 40% of total government revenue. Moreover, it estimates the cumulative total revenue loss for oil-producing countries by 2040 will be $13 trillion (in 2020 dollars).
Interestingly, the think-tank describes its report as a wake-up call to oil-producing countries as well as international policymakers. According to Carbon Tracker, they have planned on the basis that demand for oil will increase until 2040. However, the demand will have to fall to meet climate targets. Moreover, oil prices will be lower than oil producers and industry expects at the moment.
As a reminder, the report prepared by Carbon Tracker looks at what would happen to government revenues if the increase in global temperature reaches 1.65C. Importantly, the $13 trillion figure for lost revenue is compared with what it calls business as usual, expectations of continued growth. It is worth noting that it includes countries whose economies are not dominated by the oil industry, such as the U.K., the U.S., China, and India.
Oil-producing countries and potential impact
Interestingly, the main focus of the report is a group for which the loss of oil income will be more challenging as they rely on the oil industry. Importantly, the dependence on oil and gas revenue is very obvious in the case of some countries.
People should take into account that some countries face very large losses of total revenue. For example, in the case of Iraq and Equatorial Guinea, the figure is more than 80%, and for another seven countries, including Saudi Arabia, the figure is more than 60%. As for other countries such as Angla and Azerbaijan, the predicted loss is at least 40%.
However, it is possible to mitigate risk factors. For instance, countries should invest more money in education. Moreover, governments should work with companies to address their concerns. Moreover, capital that is not invested in oil and gas can instead be used to invest in industries that are more resilient to the energy transition. Furthermore, it is important to analyze the situation in such countries to find the best solution for each country.