As the global energy market undergoes a significant transformation, increased oil price volatility and geopolitical uncertainty are set to shape its future. The era of cheap certainty is behind us, and a new era of volatility and uncertainty has begun.
The global energy market is on the cusp of a significant transformation, driven by shifting geopolitics, evolving climate commitments, and deepening changes in trade flows. As supply chains reroute and alliances fracture, one truth holds: the age of cheap certainty is over.
Increased oil price volatility will continue to be a major factor, with geopolitical uncertainty contributing significantly to market fluctuations. The ongoing transformation of energy doctrine in some regions will also lead to deeper changes in how energy is traded and consumed. Traditional trade routes remain disrupted as Russia increases its supply through alternative routes, while Europe continues to explore non-Russian sources of imports.
Oil price volatility refers to the fluctuations in global oil prices.
Factors contributing to this phenomenon include geopolitical events, changes in supply and demand, and economic conditions.
According to the International Energy Agency (IEA), oil prices can fluctuate by up to 20% within a single year.
The Organization of the Petroleum Exporting Countries (OPEC) plays a significant role in regulating global oil production and influencing prices.
Energy security and climate change concerns are spurring further investment in renewable energy in Europe and other major economies. Despite the downgrading of the overall agenda with the arrival of a new White House Administration, the focus on sustainable energy remains unwavering. This shift will have significant implications for the global energy market, as investors who fail to adapt to this new reality risk being left behind.
Europe has made significant strides in adopting renewable energy sources, with solar and wind power leading the charge.
According to the European Commission, renewables accounted for 34% of the EU's gross final energy consumption in 2020.
Germany, Spain, and Denmark are among the top performers, with investments in offshore wind farms and solar parks driving growth.
The EU aims to increase the share of renewables to at least 32% by 2030, with a focus on reducing greenhouse gas emissions and mitigating climate change.
Competition for stable and reliable energy supplies will continue to intensify among major consuming countries. Governments of the world’s major economies are likely to release strategic reserves (SPRs) in response to geopolitical turmoil and trade tariffs, further disrupting market dynamics. As the global energy landscape continues to evolve, one thing is clear: the era of cheap certainty is behind us, and a new era of volatility and uncertainty has begun.
The energy supply competition refers to the increasing trend of countries and companies seeking alternative sources of energy to meet their growing demands.
This phenomenon is driven by concerns over climate change, energy security, and economic viability.
According to the International Energy Agency (IEA) , renewable energy sources accounted for 26% of global electricity generation in 2020, up from 21% in 2010.
The top contenders in the energy supply competition include solar, wind, hydroelectric, and geothermal power.
The decision by OPEC+ to ramp up oil production starting in April 2025 will largely be motivated by its need to maintain market share amid trade tensions. However, this move may not have the desired effect, as the market is already sensitive to supply disruptions. The upcoming deal between the U.S. and Iran could also impact oil prices, with potential for Brent to decline further if a temporary ‘nuclear deal’ is negotiated.
European countries continue their efforts to diversify energy sources away from Russia, but the burden of these changes falls on retail consumers, who are experiencing rising inflationary pressures. EU energy bills have jumped 12 percent on average after the price cap lift, with spikes of 16 percent in January 2023 alone.
Russia’s oil revenues have dropped to their lowest point since mid-2023, and its offshore oil shipments have fallen to 3.13 million bpd. However, Russia remains a significant player in the natural gas supply market, with plans to increase its production in 2025. The lack of transparency around planned volumes of LNG deliveries via the intermediary marine fleet will continue to set the stage for increased volatility and heightened anxiety.
The global energy map is being redrawn in real time. As investors who treat volatility as an anomaly are left behind, it’s essential to recognize that the age of cheap certainty has come to an end. The future of the energy market will be shaped by increased oil price volatility, geopolitical uncertainty, deepening changes in trade flows, and the ongoing transformation of energy doctrine in some regions.
- observer.com | Crude Realities: Energy Markets Are Betting on Chaos
