From unstable markets to the AI boom: Key trends in global energy for 2025.
The year 2025 promises significant changes in the global energy landscape. From shifts in the geopolitical balance to breakthroughs in low-carbon technologies and the increasing influence of artificial intelligence (AI), all of these developments will present both new opportunities and risks.
RBC-Ukraine outlines the key trends for 2025 according to the leading consulting firm Rystad Energy.
Increased Geopolitical Uncertainty
The geopolitical upheavals shaping 2025 will lead to a year of heightened uncertainty. The dynamics of the relationship between the USA and China under the new Trump administration will be in the spotlight.
At the same time, the global community will remain focused on the situation in the Middle East and the war in Ukraine. The rising instability in the Global South, divisions in international alliances, and the development of AI may alter the global order.
Furthermore, the introduction of American tariffs poses a threat of a global trade war, which could hinder growth and spur protectionist policies. To these challenges, the slowdown in China's economic growth adds significant potential consequences worldwide.
Oil Production in Relative Calm
According to forecasts, investments in oil exploration and production will decline by 2%, indicating a plateau after the rapid growth at the beginning of the decade.
Investment in deepwater projects is expected to rise by 3%, driven by developments in Suriname, Mexico, and Turkey. Investments in shelf projects will increase by 2%, attributed to activity in Indonesia and Qatar. At the same time, a reduction in investments in shale oil of about 8% is anticipated.
Rystad Energy estimates that global oil demand will grow by approximately 1 million barrels per day. However, rapid supply growth will lead to an oversupply and a drop in prices. Countries outside OPEC+ are expected to boost production by 1.4 million barrels per day. However, it remains unclear how OPEC+ will respond to Trump's call to "open the floodgates."
"Storms, Baby, Storms" and Shale Oil in the USA
Donald Trump has made it clear he supports incentivizing increased oil and gas production in his country. American companies may be encouraged by this rhetoric, although it is unlikely they will increase drilling budgets amid stagnant well productivity and a potential oil surplus in the market.
Reports for Q3 2024 indicated that they are still not focused on expanding drilling activities. Currently, it is expected that investor priorities will outweigh Trump's political considerations.
"They are unlikely to agree to lower returns in the near term along with reduced capital efficiency, which would lead to a return to a high-yield production growth model," said senior analyst at Shale Research Matthew Bernstein.
LNG Exports Could Become a Key Asset
The new US administration's push for deregulation and energy dominance could accelerate the export of American liquefied natural gas (LNG). However, the rapid implementation of these projects may worsen the oversupply situation in the medium term.
A potential surplus in global markets could destabilize prices, especially if trade wars with China resume, negatively impacting LNG producers. Additionally, Trump will need to find a delicate balance between increasing supplies to Europe and managing his stance on Russia. He sees the growing demand in the EU as an opportunity to reduce Moscow's influence. However, ending the war in Ukraine may require easing sanctions.
More Energy Due to AI and Electric Vehicle Boom
Global electricity demand is entering a period of accelerated growth due to decarbonization efforts (accompanied by the closure of so-called "dirty generation"), the increasing number of electric vehicles, and the rapid expansion of data centers for artificial intelligence.
By the end of the decade, demand from data centers alone is expected to more than double, reaching 860 TWh. Consequently, technology companies will become some of the largest players in the electricity markets.
To meet these needs, some companies are already turning to additional sources. It is anticipated that by 2025, the growth of solar and wind capacities will reach a new record, providing about 1,000 TWh to meet part of the demand. There is also interest in new small modular reactor (SMR) technologies.
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The Rise of "Green" Energy
Following the COP29 summit in Azerbaijan, many ambitious climate plans were proposed, including commitments from Indonesia, Mexico, and the European Union towards net-zero (reducing emissions through a transition to renewable sources) and a gradual phase-out of coal.
However, 2025 may serve as another reality check for "green" energy. Growing demand could shift favor back towards fossil fuel sources, and funding for "green" projects will be uncertain.
It is likely that the battery and solar photovoltaic markets will remain in a state of oversupply. Global solar energy is expected to grow by approximately 600 TWh this year, equaling the annual increase in primary oil energy for the first time.
A Decisive Global Conversation on Climate
In February, countries must present their "nationally determined contributions," outlining climate actions up to 2035 aimed at limiting emissions. The feasibility of these plans will be determined at the COP30 conference in Brazil in November 2025.
Although the previous conference announced funding for climate programs at $300 billion annually (until 2035), this figure is far from the target of $1.3 trillion. Moreover, new rules for trading CO2 emissions quotas will be crucial.
Viability Check for Clean Hydrogen
Due to the increase in canceled projects, the hydrogen sector is expected to face a downturn. Progress on individual projects will be supported in Europe and Japan, but other regions will continue to encounter challenges.
With Trump's return to the White House and the upcoming elections, the German parliament is expected to bring more clarity to the issue of political support for "green" hydrogen, as the USA and Germany are key markets for this resource.
Learn more about the technology in the article "Energy from Water. What is "green" hydrogen and how is it planned to be produced in Ukraine."