Energy
OUTLOOK: Emerging Markets and Renewables – The Twin Engines of Energy Growth for 2025
OERLive analyses the EIA’s latest energy forecast, highlighting trends in oil, natural gas, and production shaping 2024–2025
As the global energy landscape evolves – driven by geopolitical events, economic trends, and shifting consumption patterns – OERLive explores the latest projections from the U.S. Energy Information Administration (EIA).
The EIA recently released a comprehensive forecast providing detailed insights into key energy metrics, including oil and natural gas consumption, production, and pricing. The report also delved into the anticipated trends and driving forces that will shape the energy sector over 2024 and 2025, offering valuable insights for industry stakeholders and policymakers alike.
Global Oil Consumption: India Leading the Growth
The EIA forecasts that global oil consumption will continue its upward trajectory in the coming years, largely driven by emerging economies. India is projected to be a major contributor, accounting for 25% of the total global oil consumption growth. Over the two-year forecast period, global oil consumption is expected to increase by 1.0 million barrels per day (b/d) in 2024, followed by a further rise of 1.2 million b/d in 2025.
This growth reflects India’s rapid industrialisation, urbanisation, and growing purchasing power. As the world’s fifth-largest economy, India’s demand for energy, particularly liquid fuels, is becoming a pivotal factor in shaping global consumption trends.
Global Oil Inventories and Prices: OPEC+ & Geopolitical Uncertainties
Geopolitical concerns and OPEC+ production cuts have created a ripple effect across global oil markets. The EIA anticipates that these factors will exert upward pressure on oil prices in the short term, with Brent crude oil prices averaging US$78 per barrel (b) in the first quarter of 2025 (1Q25).
However, the report states that the tide is expected to turn by the second quarter of 2025, as global oil production growth alleviates supply tightness and allows inventories to rebuild. As a result, the average Brent crude price is forecast to decline to US$74/b in the second half of 2025.
This dual-phase trend underscores the delicate balance between supply and demand. The role of OPEC+ in managing production levels and the influence of geopolitical developments will remain critical variables shaping oil price dynamics.
Natural Gas Prices: Seasonal Trends and Export Demand
Natural gas markets are also poised for significant shifts. In line with seasonal patterns, the Henry Hub natural gas spot price is expected to rise to US$2.80 per million British thermal units (MMBtu) during the winter months of 1Q25. The EIA notes that unusually warm temperatures in October and early November 2024 delayed the onset of natural gas storage withdrawals, keeping prices below US$2.00/MMBtu in early November.
Looking ahead, the EIA predicts that the Henry Hub price will average US$2.90/MMBtu in 2025, driven by growing global demand for U.S. liquefied natural gas (LNG) exports. This increasing reliance on U.S. LNG reflects a broader trend of energy diversification among importing nations, particularly in Asia and Europe, as they seek to bolster energy security and reduce reliance on single suppliers.
Natural Gas Production: Steady Growth Despite Pricing Challenges
U.S. natural gas production is expected to maintain a steady pace despite facing challenges from low prices in 2024. Marketed production is forecast to average 113 billion cubic feet per day (Bcf/d) in 2024, a figure relatively unchanged from 2023. This stabilisation contrasts sharply with the robust production growth seen in the previous three years.
In 2025, U.S. natural gas production is projected to increase modestly by 1%, reaching 114 Bcf/d. The Permian Basin, a major oil and gas-producing region, is expected to lead this growth with a 6% increase in output. Despite price volatility, advancements in drilling technologies and infrastructure investments continue to support production growth in key regions.
Electricity Generation: Renewables on the Rise in Western Markets
The electricity sector in the U.S. and EU is undergoing a notable transformation, with renewable energy sources playing an increasingly prominent role. The EIA forecasts a 3% increase in electric power generation in the US in 2024, largely driven by heightened air-conditioning demand during hotter summer months.
Natural gas and solar power are expected to meet the bulk of this increased demand. Natural gas-fired generation is anticipated to rise by 3% in 2024 compared to 2023, while solar generation is set to surge by 34%. Solar power’s rapid expansion reflects continued investments in solar capacity and technological advancements that enhance efficiency and affordability.
This growth trend is expected to persist into 2025, with solar generation projected to grow by an additional 31%. Higher natural gas prices may temper electricity demand from gas-fired plants, further boosting the share of renewables in the U.S. energy mix.
Notable Forecast Changes: Propane and Natural Gas Pricing Adjustments
The EIA’s November forecast includes notable adjustments to price projections for propane and natural gas. The Mont Belvieu propane spot price is now expected to average US$0.80 per gallon in both 2024 and 2025, representing an upward revision of 3.4% and 13.4%, respectively, compared to the October forecast.
Meanwhile, the Henry Hub spot price forecast has been adjusted downward. Prices are now expected to average US$2.20/MMBtu in 2024 (a 4.8% decrease from the previous forecast) and $2.90/MMBtu in 2025 (a 5.2% reduction). These revisions reflect a reassessment of market fundamentals, including storage levels, production trends, and export dynamics.
The Broader Context: Implications for Stakeholders
The EIA’s forecast underscores several key trends with significant implications for global energy stakeholders:
- Emerging Economies as Growth Engines: India’s dominance in global oil consumption growth highlights the shifting balance of energy demand toward emerging markets. Energy producers must adapt strategies to meet the specific needs of these rapidly growing economies.
- Renewable Energy’s Expanding Role: The continued expansion of solar power in the U.S. signals a broader transition toward cleaner energy sources. Policymakers and investors must focus on enabling this transition through supportive regulations and financial incentives.
- Geopolitical and Supply Chain Vulnerabilities: The influence of geopolitical risks on oil prices and the critical role of U.S. LNG exports in global markets emphasise the need for diversified supply chains and robust energy security measures.
- Technological Innovation in Production: Advances in drilling and renewable energy technologies remain pivotal in balancing the competing demands of affordability, reliability, and sustainability.
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