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Currently, lenders (investors, banks) are increasingly discouraged from financing investments in fossil fuels. But they will be able to continue to finance oil companies whose strategy will be to invest a substantial part of their oil revenues in the energy transition (in renewable energies). Strategists at Natixis believe this transition model where the oil rent finances the energy transition is effective and straightforward.

WTI is consolidating just above the $48.00 mark as the market mood remains positive.

Key quotes

“Oil sellers (whether governments or national or private oil companies) receive a rent which is equal to the difference between the oil price and the cost of producing oil. This rent comes structurally from the existence of oil fields with different production costs, some of which are much lower than the oil price, which adjusts to the production cost level of the marginal field to be used. If oil-importing countries tax oil (or CO2), they recover part of the oil rent.”

“CO2 taxation makes it possible to share the oil rent between oil producers (countries or oil companies) and oil-using countries. An effective use of the oil rent would be to use it to invest in the energy transition (particularly in renewable energy). Some private oil companies (Total, Shell, BP) have announced that they will apply this strategy. We believe this strategy is effective. It simply transfers part of the investment in fossil fuels to investment in renewable energies, it legitimises the existence of the oil rent and it prevents the disappearance of oil companies, it gradually modifies their model by using a simple financial circuit.”