The energy sector, like many others, is contending with a blizzard of uncertainties, complicating the work of policymakers, business leaders and investors.
Geopolitical twists and turns are straining long-established relationships and upending deeply held assumptions. The World Uncertainty Index, devised by economists from the IMF and Stanford University, has hit unprecedented levels in recent months.
But in this time of flux, there are still some important trends that we can identify with some confidence. Here are seven that can help us keep our bearings:
The world has entered the age of electricity
Oil and gas will still be widely used for many years to come, but the use of electricity is growing twice as a fast as overall energy demand. It's the key energy input to the most dynamic parts of the global economy - such as AI, data centres and high-tech manufacturing - and is increasing its share of major sectors like road transport and heating through technologies such as EVs and heat pumps. Already today, more than half of the investment going into the global energy sector each year is going to electricity.
Renewables will keep growing
Despite some headwinds, in many countries around the world, renewables are meeting much if not all of the rising demand for electricity, often because they are the most competitive option. Solar is leading the way, as the countries that are increasingly driving energy demand, such as India, have a very high-quality solar resource, but other technologies are in play, too, including new ones coming through such as next-generation geothermal energy.
Nuclear power is making a comeback
After a series of setbacks in the 2010s, nuclear is on the rise again, generating more electricity than ever before last year. Today, more than 70 gigawatts of new nuclear capacity is under construction, one of the highest levels in the past 30 years. Soaring electricity demand from data centres means tech companies are also turning to nuclear, attracted by its promise of low-emissions, round-the-clock power supply.
Energy security risks are multiplying, especially for critical minerals
Traditional hazards affecting the security of oil and gas supplies are now accompanied by vulnerabilities in other areas, including electricity security, as highlighted by the recent major blackouts in Chile and Spain, and critical minerals. A single country, China, is the dominant refiner for 19 out of 20 energy-related strategic minerals, with an average market share of around 70%. More than half of these strategic minerals are subject to some form of export controls. Rising energy security risks from climate change are now also a certainty, intensifying the need to make energy systems more resilient to extreme weather events, as well as to cyberattacks and other malicious activity targeting critical infrastructure.
States are taking the reins
As energy is elevated to a matter of economic and national security, so governments are increasingly intervening to shape outcomes, rather than leaving them to the market. This is visible in energy technology supply chains, especially for critical minerals, as countries seek to counter the risks associated with China's high market share. Trade in oil and gas is also increasingly subject to political considerations and government-to-government negotiation - or to sanctions.
We are shifting to a 'buyer's market' for key fuels and technologies
Oil prices have already come under pressure because of relatively abundant supply, and the same will soon be true in natural gas markets, as the wave of new LNG export projects start operations. There is also ample manufacturing capacity for batteries, solar panels and other technologies. These trends can benefit fuel and technology importers, but they should not get too comfortable: this period of plenty and potentially lower prices could lead to reduced investments in energy, with implications for subsequent years.
New players are increasingly driving global energy trends
The centre of gravity in the world's energy markets is shifting as a group of emerging economies, led by India and Southeast Asia and joined by countries in the Middle East, Latin America and Africa increasingly shape energy market dynamics. They are taking up the baton from China, which accounted for more than half of global demand growth for oil, gas and electricity since 2010. That said, no other country on its own will come close to replicating China's extraordinary energy trajectory of recent decades.
Amid today's turmoil, focusing only on uncertainties can lead to indecision and paralysis. A wait-and-see approach on energy by governments, companies and investors risks storing up trouble for the future, given the world's thirst for energy and the continuous need for investment. There are still some certainties that decision-makers can rely on: let's not lose sight of them as we plan for the future.
