The impact of regulation in the oil and gas sector is set to be intensified due to the Paris Agreement.
That’s according to a study by Chatham House which analysed the impact of the international climate action agreed at COP21 in fossil fuels.
It added given the gap between current Intended Nationally Determined Contributions (INDCs) and the goal of limiting global warming to below 2°C, additional and more stringent measures will be imposed for oil and gas.
The think tank believes impact in oil demand will be negative but relatively predictable at least until batteries become economically available at scale.
It added the outlook for gas “is much more unsettling and unpredictable” as markets “will be the uncertain residual of policies to promote renewables and government attitudes to nuclear energy and use of cheap coal”.
Some investors will be deterred by “uncertainty and concern” about the future of fossil fuels, according to the study.
The think tank calls for “credible” policies otherwise oil and gas companies may make risky investments to meet unsustainable demand.
It added: “They are needed to send a strong signal to those who consume and produce carbon-based fuels so that their investment plans can be amended to reflect the shape of a lower carbon economy.”