Everyman for himself
So what fresh hell lurks next year in the energy sector in 2025? Leaning into market dynamics rather than straight statistics, here are a few projections. Global energy prices will broadly fall next year assuming that the World War III doesn’t hot up too much.
If it does, all bets are off, but the situation actually looks a little promising: Moscow and Kyiv are both hinting that they are open to the negotiating table, and the collapse of the Assad regime in Syria, to a bunch of high-strung Sunni’s, is a major problem for both Iran and Russia. While Iran might get sucked into a wider regional war, the regime really wants to avoid it – their expertise is in proxy wars, on the home front things tend to fall apart.
What the hell? We might just get lucky in 2025. While energy prices will probably drop, expect volatility: the futures market is going to be a wild ride.
Energy consumption in the rich world will likely drop slightly: European governments are surging on renewables, not to save the planet, but to save Europe. Those Russian shenanigans have made them (and everyone else) very paranoid about energy security. More than 250 GW of solar and wind capacity is set to get installed next year, although most of that is in China. Again, the Chinese Communist Party (CCP) isn’t doing this out of the kindness of its cold little heart – the CCP has a penchant for forced labor and very dirty “brown” coal – but China hasn’t got any oil, and they are sick of buying it, even at discount prices they get from Russia and Iran.This could also signal cracks in the CRINK (China, Russia, Iran, North Korea), but that is for a different insight.
Where energy demand is likely to grow is mostly in the developing world economies like Asia, Africa and Latin America where demand it will be for oil, and to a lesser and gas, in the short term. The spotlight here is India – a country not taking the Buddha’s middle road on energy, and they need it now that they are outpacing China’s growth. Droughts have stymied hydropower, but Delhi has no plans for LNG fired electricity, and their EV infrastructure isn’t good. Here India is something of an energy vanguard by doubling down on nuclear power. It has seven plants, mostly fueled by local uranium with imported supplements and is planning several more fueled by thorium, which they’ve got a heaps domestically. They’ve though it through, but nuclear power won’t be a player next year. Still, with all the hep-cat Big Tech US investment in AI it is coming.
For 2025, the rich world is already groaning under debt, so it is going to politely balk at those COP 29 payout demands to fund the green transition across the developing world. Again, the world is in Every Man For Himself mode.
In the US production capacity is expanding to meet demand – ExxonMobil plans to up production from 3.7mm b/d last year to 5.4mm b/d by 2030. This will keep oil and gas prices down, while repealing Biden-era tax breaks and incentives of the IRA will push up the cost of renewables. That presents part of a larger problem for solar panels in particular, as the margins is razor thin. China dominates the market to the tune of 80%, but that’s based on rich government subsidies that are currently being phased out because of overproduction. It is the sort of market distortion that leads producers to believe renewable energy costs are cheaper than they are, and the market needs to work the distortions through the system. As it stands, Chinese firms are leaning into energy hungry Belt & Initiative countries in Latin America and Africa to suck up the over production. That will help a little with developing economies green plans, but don’t expect it to outpace energy demand there.
With the global markets being tariff happy, costs will likely go up. It will also lead to those pesky supply chain troubles in a fracturing world that is being forced to realign into grumpy blocs. All of which will put breaks on renewables build out and installation globally, as well as dampen China’s attempts to get the rest of the planet to absorb its overcapacity.
In sum, it will be a volatile ride to not get anywhere fast.