Last week’s CERAWeek conference in Houston—one of the most notable events of the year for the energy industry—gathered executives, politicians, and regulators from around the world to discuss key trends in energy. Here we highlight the top themes and takeaways for companies across the energy value and supply chain.
1. Rising to meet growing electricity demand is a top concern
After 15 years of electricity demand growth averaging 0.1% per year, annual U.S. demand growth forecasts now reach 3% or more. Data centers receive much of the attention, but a renewed industrial policy to reshore manufacturing, a drive toward electrification, and increased cooling and heating needs are all driving greater electricity demand.
An “all of the above” approach to increasing energy production and meet our electricity needs is critical. U.S. Interior Secretary Doug Burgum said during his conference address that “The only way we win the AI arms race with China is if we have electricity…they are moving at a speed that would suggest we are in a serious cyberwar with them.”
While natural gas power plants are favored for their reliability, new orders and installations are already at capacity for the next four to five years, and new nuclear facilities are unlikely until the early-mid 2030s. In comparison, solar and wind power – paired with battery storage – can come online in as little as 12 months in some cases. Despite recent U.S. policy shifts, renewable sources will continue playing a key role in meeting near-term electricity growth needs. Still, permitting delays and transmission constraints affect all energy sources and must be solved.
2. Natural gas is in high demand and will be for decades
Demand for natural gas is rising from all angles – power generation, liquefied natural gas (LNG) exports, and industrial demand. The U.S. is the top natural gas producer and exporter in the world, and at the lowest cost, with U.S. natural prices averaging just 22% of the average for Europe and Asia over the past year.
3. New players in the electricity business
Oil and gas companies, and even technology companies, are increasingly entering the electricity business. Oil and gas companies are turning excess or stranded gas into power for remote operations, data centers, or other facilities. Meanwhile, the large datacenter companies (so-called “hyperscalers”) are directly investing in bringing new generation plants online and restarting nuclear plants that were previously closed.
Scaling the transmission and distribution lines for this new power isn’t getting as much public attention yet but will be just as critical. Here, too, technology companies are getting involved – developing tools to redistribute load and improve capacity of the existing grid.
4. Oil sector to face headwinds
The oil sector is preparing for slowing demand growth and lower commodity prices, absent a major shock. In panels and presentations, industry executives acknowledged that global demand is likely to peak in the next five to 10 years, though notably this peak will be followed by a plateau or slow decline, not a steep drop.
As new supply continues to come online, this supply-demand imbalance, along with geopolitical pressure, is driving oil prices down, reducing margins and disincentivizing production growth.
U.S. producers face added challenges as they exhaust top-tier sites and shift into “tier 2” acreage that is generally more expensive to develop and yields lower production. To counter these challenges, energy companies must continue investing in innovative technologies and techniques to improve efficiency.
5. Geopolitical risks complicate growth and supply chains
As parts of the world shift toward more protectionist policies, including using tools such as tariffs, this creates new risks to economic growth and global trade. If tariffs lead to economic slowdowns, oil and gas demand is likely to suffer. Additionally, tariffs on essential metals for the energy industry – including steel, aluminum, and copper – will increase costs and drive shifts in supply chains. U.S. dependence on other countries for critical mineral mining and processing is also of increasing importance and leading to reshoring initiatives.
6. Decarbonization remains relevant for energy companies
Despite shifting policy priorities, oil and gas executives present at CERAWeek continued to discuss their work toward decarbonization. While no longer a key policy focus, companies will continue to invest in becoming more efficient in the field and stop leaks – which comes with financial and environmental benefits. The capital-intensive nature of energy also means that investments must be made on a long-term horizon that extends beyond individual political cycles.
Looking ahead
No longer an industry of its own, energy is increasingly an ecosystem with complex interdependencies. While challenges remain, the rising demand presents significant opportunity for companies across numerous industries that can scale and innovate to meet the moment ahead of us.
