Energy price fluctuations have dominated market matters and geopolitics over the past few years. Spikes in energy prices fuelled inflation across developed economies, with governments forced to respond. While the energy markets have cooled, the sector remains a critical focus, especially with the looming threat of climate change. Therefore, understanding the expected energy market trends for 2025 will be crucial for policymakers, investors, and industries aiming to navigate the evolving landscape.
Fossil Fuels Price Outlook:
Oil
The EIA expects the Brent crude oil spot price to remain close to its 2024 levels, at around $74 per barrel. This reflects steady global consumption patterns. Despite this, prices have rallied in early January, hitting a four-month high of $81 per barrel. This came in response to freezing temperatures in the northern hemisphere and US sanctions on Russia and Iran.
Natural Gas
The World Bank forecasts a sharp recovery in natural gas prices in 2025. The US benchmark price is forecasted to jump nearly 55%, due to increased international demand for US exports. The Asia-Pacific region is expected to be the main driver of global consumption, as it aims to shift away from coal.
Coal
The World Bank expects coal prices to fall by about 12% in 2025 but remain above pre-pandemic levels. This is due to a projected decline in supply, driven by falling global coal consumption as a result of international phase-out commitments. Chinese demand is expected to fall the most.
Renewable and Nuclear Energy: Key Developments for 2025:
Renewables
Renewable technologies are putting growing competitive pressure on fossil fuels. According to Wood Mackenzie, the Levelised Cost of Electricity (LCOE) for wind and solar fell by 16% in 2024, while coal and gas saw a 3% increase. Wind and solar are already cheaper than fossil fuels, according to IRENA’s latest annual Renewable Power Generation Costs report. As a result, renewables are expected to make roughly a third of global electricity generation in 2025. With cleantech energy supply spending forecast to reach $670 billion, renewable development continues to be a space to watch.
Nuclear
The IEA predicts that nuclear power generation will reach an all-time high in 2025, with a 3% increase in nuclear power plant output. At COP28, twenty-two of the world’s most developed countries agreed to triple global nuclear energy output by 2030, despite data from Lazard showing its uncompetitive LCOE. Technological advancements, such as Small Modular Reactors (SMRs), and energy security concerns are driving this trend, as countries seek to find reliable energy sources. This positions nuclear energy as a potential long-term partner to renewables.
Conclusion
These trends provide critical insight into the future of the energy sector. Renewables are leading the charge, taking strong momentum into 2025. However, governments have identified nuclear energy as a complementary partner, primarily due to energy security concerns. Oil price trends underscore these concerns with recent fluctuations being the result of geopolitical factors. On the flip side of this, natural gas is expected to have a strong year, despite risks of geopolitical influence, as countries transition away from coal. As we progress through 2025, these developments will continue to shape the global energy landscape. How the relevant stakeholders respond remains to be seen.