Introduction
The energy market has lately experienced sharp fluctuations characterized by price volatility and severe energy crisis in several parts of the world. The “drill baby drill” campaign by the Trump administration has further complicated the situation. Though the campaign promises some short-term economic relief due to increased domestic production, its long-term impact on oil and gas sustainability is a bigger concern for industry players and environmentalists.
Compelled by these shifting dynamics, the industry is now trundling towards a new context attributed to slowing demand for fossil fuels and an oversupply of gas and oil. As per Stellarix
energy consulting experts, these factors will impact several sectors especially the power sector, intensifying competition in the renewables sector, lowering electricity prices, grid modernization, and investment challenges in clean energy. However, several other trends are emerging that will act as interdependent realities shaping the global energy market.
Emerging Trends Reshaping the Global Energy Market
1. Persistent Geopolitical Uncertainties
Recent geopolitical and economic turbulence is setting the stage for further uncertainties in 2025. The new US administration, a ceasefire between Israel and Palestine, and the changed US-China equation will definitely contribute to increasing instability across the global south. Simultaneously, the increasing US tariffs resulting from the global trade war are leading to protectionist policy frameworks and stagnant growth. Governments are also expected to focus their attention on rising deficits and address the side effects of the Chinese economy’s economic slowdown.
2. Upstream Sector May Remain Consistent
It is estimated that the investments across the global upstream sector will go down by 2- 3% this year, signifying a dip following the strong growth of the last decade.
Nevertheless, deepwater investments may rise by 2-4% while offshore shelf investments may go up by 2-.25%. Along with this, the demand for liquids across the globe is expected to go up by .9-1.1 million bpd aided by the oversupply of non-OPEC+ oil supply decreasing the pressure on oil prices. Both deepwater and tight oil supply increases will significantly contribute to this growth.
3. Refinery Margins Will Remain Constrained Due To Slowing Demand
The profit margins of refineries are to remain narrow, especially during the first few months of this year. The second quarter may bring some peace for Asian refineries as the refinery maintenance comes in. However, demand in China may remain low due to the rising percentage of EVs and improving fuel efficiency. The weak-margin trend is already leading to attrition in refineries in Europe, the US, and China.
4. US Shale Oil Players May Not Comply With The New Government’s “Drill Baby Drill” Campaign
The rhetoric support from Trump’s administration might encourage some executives, but this doesn’t stand true for all stakeholders. With stagnated well productivity and an overwhelming supply of oil, most energy companies emphasize ensuring optimum returns to their shareholders along with increased M&A activity for inorganic growth.
None seem too eager to expand their drilling operations to placate the government. Most Shale 4.0 investors are now prioritizing navigating Trump’s policy considerations. Even
in the near future, investors will resist lower near-term returns, reducing capital efficiency, etc.
5. The Electricity Demand Reaches New Heights In The Wake Of The EV and AI Wave
Power demand across the world is accelerating at an unprecedented pace. A larger share of this demand is fuelled by sustainability efforts and technological advancements like decarbonization efforts, the rise of electric vehicles, and rapidly expanding data processing capabilities and the need to keep them down. Out of these, data centers consume a considerable share of electricity, and this requirement is expected to grow by 100 percent by 2030. Tech companies have been the biggest acquirers of PPA (Power Purchase Agreements) as they sprint to secure carbon-free power. Several tech companies are also investing in extra baseload sources, including nuclear power. In this lieu, small-sized modular reactor technologies are receiving a lot of traction despite high costs and unproven technological compatibility. This will shortly incline the attention toward renewable energy sources, leading to considerable growth in wind and solar capacity.
6. Supply Chain Disruptions Still Haunt Energy Markets Worldwide
Accelerated investments in the O&G market and renewables are putting additional pressure on the already weakening supply chain. Geopolitical shifts and the intensifying intent to protect margins exacerbate this situation. It is assumed that this will lead to noteworthy changes in the worldwide supply chains, increasing the inclination towards energy transition and support services and equipment.
7. Low Carbon Energy Markets Are Slated For Exceptional Growth
With more and more climate plans coming into play, the growth scenario for low-carbon energy is becoming brighter and clearer than ever. Nevertheless, this growth is currently challenged by several impediments ranging from fossil fuels favoring policies, increasing pressure on green energy stocks, and growing uncertainties around subsidies and funding. Simultaneously, the solar PV and battery market will remain oversupplied while biofuel markets will show solid recovery. Europe’s carbon market will move towards maturity with the implementation of CBAMs (Carbon Border Adjustment Mechanism) and a better way out for FIDs on low-carbon hydrogen projects and CCUS (carbon capture, utilization, and storage)
Conclusion
It is going to be an eventful year for the energy world, marked by increasing volatility, policy evolution, and geopolitical shifts. Most companies will be looking to revise their market & business, sustainability, and research & development strategy to adapt the
these changes. However, they will need considerable capital and policy support to make the best of expert counsel and maintain their edge in their respective niches.