KBRA releases research that examines how the transition from fossil fuels to sustainable energy sources are impacted by the current price volatility in the global energy markets. We conclude that while high energy prices will delay the near-term energy transition, this volatility should ultimately accelerate the transition toward sustainable energy in the U.S. in the long term. This optimistic outlook stems from the expectation that the significant and prevailing political, economic, and environmental pressures will continue to accelerate the global push toward a sustainable future.

Key Takeaways

• The energy crisis has increased awareness of the U.S.’s energy vulnerability to the oil and gas markets. While this volatility should ultimately accelerate the transition toward sustainable energy, the country’s near-term energy transition plans will be slowed because of high energy prices.
• In the transportation industry, global supply chain issues have triggered a vehicle production shortage, leading to an increase in the average sale price of both new and used vehicles. Over the short term, the newer fuel-efficient vehicles that are needed for the transportation industry’s energy transition plan are still too expensive for many households—assuming these vehicles are even built.
• In the power generation sector, utilities are facing inflationary raw material and capital expenditure costs. These companies have responded by slowing down the pace of retiring their coal-fired plants. Instead, utilities are incorporating coal into their power generation fuel mix to temporarily lower their overall power generation costs.
• U.S. fossil fuel production is expected to soar in 2022 amid high oil and gas prices. The government has already called for U.S.-based oil and gas producers to increase production of the same fossil fuels that energy transition plans seek to eliminate.

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About KBRA

KBRA is a full-service credit rating agency registered in the U.S., the EU, and the UK, and is designated to provide structured finance ratings in Canada. KBRA’s ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.

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