Fossil-fuel expansion is a risky bet as global demand shifts – UK expert

University of Sussex researcher says countries that plan early for declining oil and gas dependence are better positioned to protect workers, communities and public finances.

Canada’s push to expand oil and LNG production should be tested against changing global demand and the risk that costly new infrastructure becomes stranded, says University of Sussex professor Peter Newell.

Newell studies what he calls “supply-side” climate policy: government measures that constrain fossil-fuel production rather than focusing only on reducing emissions from consumption. His new paper with University of Sussex colleagues examines why Costa Rica, Colombia, Denmark and the United Kingdom have adopted bans, moratoria, finance restrictions or other measures intended to limit oil and gas supply.

The countries moved for different reasons. In some cases, mature reserves were already declining. In others, governments saw stronger economic alternatives or concluded that developing a fossil-fuel industry created political and economic risks.

For Canada, Newell said the key question is whether new oil and gas investments will remain economic as global energy demand changes.

“These things that look like assets right now in 10 or 15 years time, or even sooner in some cases, could well be stranded assets,” he told Energi Media. Governments can compound that risk, he said, when major infrastructure requires extensive taxpayer support.

Newell’s argument comes from research into countries that have deliberately acted on fossil-fuel supply. His 2026 paper, published in the Review of International Political Economy, argues that supply restrictions are shaped by resource conditions, alternative economic opportunities, political institutions and the ability of governments to manage conflict among business, labour and civil society.

Newell said successful transitions require credible alternatives for regions that depend heavily on fossil-fuel production. Denmark combined declining North Sea reserves with the growth of a major wind industry. Other jurisdictions have relied on regional redevelopment, worker retraining and long-term economic planning.

“Pretending it’s not coming down the road is really not helpful,” Newell said. Countries that have managed change better, he argued, have been willing to discuss diversification early and provide policy and financial support for affected workers and communities.

The discussion also turned to finance. Newell said investors need consistent government signals before capital moves decisively from fossil fuels into cleaner technologies. He summarized the conditions as “long, loud and legal”: long-term policy, strong market signals and legal durability.

He also agreed with Energi Media’s argument that proposals requiring public capital should face a rigorous demand test. Europe is already warning some fossil-fuel exporters that imports will decline as the energy system changes, he said.

“There’s lots of fictitious assumptions about oil and gas forever, which don’t stand up to a lot of scrutiny,” Newell said.

For Canada, that shifts the debate from whether producers can increase supply to whether customers will still want enough of it, for long enough, to justify billions of dollars in new infrastructure.