Tova Gaster - 
With the transition away from fossil fuels under way, gaining momentum, and picking up a major boost from the past month of energy price shocks, Canadian banks, provinces, and the larger economy remain heavily exposed to the financial risk of continuing to prop up oil and gas companies, warns Carbon Tracker.
Analysts from the London, UK-based think tank updated two recent reports, Fading Fortunes and Petro-Provinces at Risk, during a March 31 webinar co-hosted with The Energy Mix. They framed new fossil fuel investments against the backdrop of the price shocks brought on by the Middle East war and the blockage of the Strait of Hormuz.
Keeping Canadian regional economies tied to oil and gas “puts risk not only on oil and gas investors, but also on communities,” said Carbon Tracker analyst Rich Collet-White.
Surging oil prices following American military actions in Venezuela and Iran, and amidst ongoing war in Ukraine, reveal inherent risks in a non-renewable, oil-dependent energy system.
They’re also prompting countries in Asia, Africa, and elsewhere to speed up the shift from fossil fuels to clean electricity, with International Energy Agency data already showing clean energy investments on the rise and fossil fuel financing stagnating.
In its reporting last fall, Carbon Tracker concluded that investors in Canadian oil and gas will face serious financial risk—and provincial revenues from the industry could fall 82%—as the global energy transition unfolds through the 2030s.
“Both Canadian oil and gas company valuations and provincial budgets are exposed to the same structural risks of weakening long-term oil and gas demand,” the think tank stated in a release for the two reports. “Under a fast-paced energy transition, new projects place up to 30% of Canadian oil and gas value at risk,” yet the industry would only gain about one-third as much if a slower transition led to longer, stronger demand for fossil fuels.
Those findings show that Canada is disproportionately exposed to fossil fuel risk, Julie Segal, climate finance manager at Environmental Defence Canada, told webinar participants, with the oil and gas sector deeply embedded in Canadian banks, investments, and public sector spending, including pensions.
“The risk related to the energy transition is systemic in Canada’s financial system,” Segal warned. Yet the federal government’s major projects agenda is fast-tracking oil and gas projects across the country, while decreasing regulatory scrutiny over fiscal and environmental risk.
In November, Ottawa and Alberta signed a controversial memorandum of understanding (MOU) to advance a northwest coast oil pipeline. But it remains uncertain whether private markets will assume the risk of investing in new fossil fuel infrastructure.
Future oil and gas demand is also debatable: Alberta is pinning its export hopes on Asian markets, but demand might not keep pace with Canadian supply, warned Carbon Tracker analyst Olivia Bisel. Even if it does, trade depends on long-term, stable partnerships that remain uncertain.
New oil and gas infrastructure may ultimately depend on some degree of public financing to derisk it, said Yrjo Koskinen, research director at the Institute for Sustainable Finance.
Otherwise, it’s unclear how proponents will finance the pipeline. But it’s risky for private capital to invest in a project when energy transitions and commodity price shifts could undermine its profitability, said Koskinen.
Adam Scott, executive director of Shift Action for Pension Wealth and Planet Health, said pension funds are currently facing intense pressure to invest Canadians’ retirement savings in major fossil fuel megaprojects, without transparency about the risks they carry.
“We’re in a moment where the federal government is stripping away climate policy to make projects like this possible, but also putting their finger on the scale to shift the economic benefits to make projects like this go forward,” he told participants.
Yet Canada’s stalled progress on climate finance disclosure standards makes it impossible for investors and the public to fully understand the scale of fossil fuel risk exposure, said Segal.
Industry lobbyists and some forecasters have framed international oil price spikes as an opportunity for Canada to expand its domestic extraction and production capacity. However, panelists emphasized that fossil fuel infrastructure is a long-term investment, ill-equipped to respond to short-term economic shocks—or to withstand a shift from fossil fuels to clean electricity that will likely be accelerated by the energy price shock.
Fossil fuel investment “exposes companies to commodity price declines well into the future as the energy transition continues to unfold,” Bisel said.
Karen Ashikeh 
Mitchell Beer 
Making money from war, especially when it is on another continent and part of your profits comes from selling armaments. The taxes paid and the fottunes made must be outlawed to stop the endless wars that are killing both people and Planet. We still pay though according to this article on the price of gas in the USA;
USA consumers have NO reason to be paying higher prices for gas. USA oil production and shipping does not need to go through the Straight of Hormuz to get to customers. Here is something from todays report on the effects of war on price gouging. Our usual oil supplies may be going international for oil companies to increase their profits by selling USA supplies to other nations. South America and Asian nations are WEST of US for shipping. Walk instead of drive, folks and boycott gas and oil to end a war against Iran and even the USA consumers! Truth be told here, 120% tax should be charged on profits made selling USA and Venezulan oil (controled by USA
A stories from today;s news” Gas prices in Los Angeles surged to $6 per gallon this week after the U.S. and Israel’s and the U.S.’s attack on Iran prompted the nation to close the Strait of Hormuz. However, California’s petroleum market watchdog is warning that some of the inflated price may be due to price gouging,.”by Researcher Blanca Begert reports.
“In January, refineries were making 49 cents on the gallon, the watchdog group said; now, it’s closer to $1.25.”
Thanks, Karen. What we’re told — the dynamic you point to in your comment — is that oil and gas are sold around the world, so countries with no direct reason to pay more have to accept higher prices if they want to get the supplies.
The Ember think tank in the UK has done a great job of documenting how quickly poorer countries are priced out of the global market when an energy shock hits. But the problem also carries the seeds of the solution — when Putin’s war in Ukraine drove up prices for years ago, Pakistan embraced rooftop solar and replaced one-third of its fossil-fueled electricity demand in just two years. And they’re not alone.