2025 Energy Market Drivers

E3 Energy has created this article to guide our clients through the critical factors influencing the wholesale energy market in 2025. By examining geopolitical developments, supply-demand trends, and the growing momentum of renewable energy, it highlights the dynamics shaping energy prices and availability. Our professional analysis aims to empower clients with the insights needed to navigate uncertainty and make strategic decisions in an increasingly volatile energy sector.

Wholesale Energy Market: Key Drivers and Insights for 2025

The oil and energy markets are entering a pivotal period in 2025, shaped by geopolitical shifts, energy transitions, and market dynamics. Oil, often regarded as the most political of commodities, will experience increased volatility as political decisions in key regions intersect with supply-demand fundamentals.

Simultaneously, natural gas and renewables will continue to play critical roles in balancing the energy trilemma of security, affordability, and sustainability. Emerging trends, such as the rise of renewable projects, shifts in US shale/oil strategies, OPEC's control on regulatory changes, and Asia’s downstream focus in their economy, will add layers of complexity to the energy landscape. These forces will determine the trajectory of energy markets in the coming year, presenting both opportunities and risks.

Bullish Factors

Geopolitical Tensions - 2025 is set to be a year of heightened uncertainty. The US-China dynamic, under a new US administration, will take the spotlight. At the same time, ongoing conflicts in the Middle East and the war in Ukraine will continue to impact markets.
US Policy Shifts (e.g., support for Ukraine) could influence energy stability.
Muted US Shale Growth - Limited investments in US shale production will keep output flat, enabling OPEC to maintain control over prices.
Potential for Prolonged High Oil Prices in 2025 due to OPEC's regulatory strategies.
China’s Refinery Expansion - China’s move to annual crude import quotas and expanded product exports adds flexibility and global market influence.
Government Incentives and increased auction volumes will support renewable sector momentum. Ed Miliband announced the budget for this year’s renewable energy auction is being increased by £500 million to over £1.5 billion - a record budget helping build new green infrastructure as part of the mission to deliver clean power by 2030. This will have a dual impact, promoting the adoption of renewable energy while also increasing transportation costs associated with constructing and delivering these new energy sources.
Increased Electricity Demand - Much more electricity will be needed to keep pace with the AI and EV boom. Global power demand is entering a period of accelerated growth, fuelled by industrial decarbonisation efforts, the rise of EVs, and the rapid expansion of data centres. Forecasters predict that global electricity demand from data centres will more than double by the end of the decade, increasing demand for energy sources.
Inflation Impact on Offshore Wind - While inflation is flattening, lingering effects on capital costs may delay or hinder offshore wind expansion.
US Spot Gas Prices to rise by over 40% in 2025 from 2024 levels as advised by market speculators.
Strong Economic Recovery and Growth - If major economies like China and India experience robust industrial growth, energy demand (particularly for oil, gas, and coal) will surge, impacting global energy prices.
Russian gas imports into Europe have now decreased by 67% compared to previous years, raising questions about how replacing this supply and how is will affect market prices.
Concerns have been raised regarding the gas supply across the European continent, as gas needs are now solely reliant on the TurkStream natural gas pipeline.
Energy-intensive industries have also experienced a 20% reduction in consumption compared to previous years due to the high cost of natural gas, leading to the implementation of gas rationing strategies among energy-intensive consumers

Bearish Factors

Maintaining high levels of gas storage to support energy security will continue to support market prices.
Record-Breaking Solar and Wind Additions of over 500 GW will cover most energy demand growth into 2025.
The International Energy Agency (IEA) has predicted that global oil supply will outstrip demand in 2025, even if OPEC continues with its production cuts. This is due to increasing oil production from countries like the United States and others outside of OPEC, while demand remains weak.
US LNG exports are expected to jump 14% in 2025 over levels in 2024 to support the demand requirements.
A decline in global coal power generation indicates a long-term shift towards renewable energy sources. This reduced demand could exert downward pressure on energy prices, especially in markets where coal has historically been a dominant player.
Stabilising interest rates and strong cash flows will drive strategic acquisitions in the oil and gas field services and clean energy sectors.
If Asian economies, especially China, face sluggish growth or manufacturing slowdowns, energy demand could weaken, leading to a drop in prices.

The year 2025 is shaping up to be a pivotal one for global energy markets, driven by a combination of challenges and opportunities. Geopolitical tensions, the management of fossil fuel supplies, and the transition towards cleaner energy are all contributing factors. On one hand, there are indications that prices could rise; on the other hand, risks highlight the fragility of the global energy system. For now, strong gas storage levels and increasing contributions from renewables are helping to stabilise prices and provide a solid foundation.

Through our expertise, we provide proactive and strategic insights, empowering our clients to anticipate market trends well in advance. This foresight enables businesses to stay ahead of potential energy cost increases. By assessing market conditions ahead of contract renewal anniversaries through portfolio market cost testing and executing tenders at the optimal time, we deliver significant savings and advantages to our clients. Partnering with us ensures you consistently maintain a strong position, enabling cost-effective purchasing decisions and giving your business full access to our extensive accredited renewable energy supplier chain. This approach ensures that your energy portfolio fully engages with the UK energy marketplace.

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