Fossil Fuel Endgame: $2.3 Trillion on the Line

Welcome to The Strawman, the daily climate newsletter that's wondering if the fossil fuel industry’s long-term strategy is just whistling past the graveyard—except the graveyard is full of stranded assets.

The Fossil Fuel Gamble: Boom Now, Bust Later?

Oil companies are riding high on current demand, with major players like ExxonMobil, BP, and Equinor pumping more into fossil fuel investments, banking on strong consumption well into 2050. OPEC even predicts a bump from today’s 104 million barrels a day to 120 million by mid-century.

But what if they’re wrong? A new study suggests that the good times may be on borrowed time. If countries actually stick to their climate pledges, demand could drop sharply, leaving a whopping $2.3 trillion worth of fossil fuel assets stranded and completely unsellable by 2040. Maybe the real business was the friends we made along the way?

$2.3 Trillion at Stake: Who’s Most Exposed to Stranded Assets?

The study found that the financial fallout wouldn’t be evenly spread. The US, Russia, and China are set to take the biggest hits—think $546 billion, $402 billion, and $184 billion in losses, respectively.

But the UK also stands out. Despite accounting for just 1% of global fossil fuel assets, its financial exposure is disproportionately large, representing 6% of the potential losses. That’s a £2,000 risk per citizen, largely thanks to pension fund investments tied up in fossil fuels. If the music stops, retirees could be left holding more stranded assets than beachgoers at low tide.

Even in the less ambitious scenarios—where governments only sort-of stick to their climate promises—the global asset loss would still clock in at $872 billion, with the UK’s slice of that pie at $49 billion. Either way, it’s a pretty expensive gamble.

Oil’s Future: Why Investors Might Be Dancing on Thin Ice

Sure, OPEC is betting big on continued demand, but the shift to electric vehicles is accelerating faster than expected. China’s EV sales are poised to overtake traditional cars this year, and the trend is spreading globally. Even sectors like petrochemicals—often touted as oil’s last refuge—are unlikely to offset declining demand from transport.

And while investors have done well in recent years (the Dow Jones US Oil and Gas index rose 105% in five years), the question is: how long can the party last? As soon as demand takes a clear dive, asset values could plunge faster than a fracking drill.

The message is clear: for investors and companies, it’s time to consider whether doubling down on fossil fuels is a smart bet—or if it's time to cash out before the music stops.

The Strawman’s Takeaway

Fossil fuel companies are betting on long-term demand, but if global climate pledges hold, $2.3 trillion in assets could be stranded by 2040. The transition is already happening—those who don’t pivot may be left holding the bag.