Political Shifts and Their Ripple Effect on Energy Markets
In the ever-evolving energy landscape of 2024, political changes across 70 nations are set to reverberate through oil markets and impact renewable energy policies. This article delves into the crucial factors driving energy markets this year.
1. Geopolitical Dynamics: Steering the Oil Market
In the intricate dance of global politics, oil emerges as a pivotal player. With general elections looming in over 70 countries, about 4.2 billion people will experience political shifts. The outcomes of these elections will wield significant influence over national politics, geopolitical landscapes, and, inevitably, oil markets. Factors such as the future of the US support for Ukraine, the EU’s climate policy ambitions, tensions in the South China Sea, trade frictions between China and the West, and ongoing conflicts in the Middle East all pose potential disruptions to the energy market.
Jorge Leon, Senior Vice President, Oil Market Research
2. Natural Gas: A Cornerstone in the Energy Transition
In the ongoing energy transition, natural gas takes center stage, addressing the trilemma of security, affordability, and sustainability. Anticipated global gas production growth of 3%, equivalent to 130 billion cubic meters (Bcm) in 2024, is expected. Although greenfield LNG project investments may slow down, they remain robust to support the soaring global LNG demand, reaching 500 million tonnes by 2027. Gas’s role in the power sector is pivotal, ensuring its reliance on a global scale for the foreseeable future.
Xi Nan, Senior Vice President, Gas and LNG Market Research
3. M&A Trend: Moving Down the Supply Chain
The consolidation trend witnessed in the upstream oil and gas industry is poised to extend into the supply chain in 2024. As interest rates stabilize or decrease, elevated cash flows will drive suppliers to explore strategic acquisition opportunities for inorganic capacity growth. This trend will affect both the oilfield services and clean energy markets, where organic capacity expansion may not be the most efficient option, given the peak activity in the oil and gas sector in 2024 and excess capacity within low-carbon sectors.
Audun Martinsen, HEad of Supply Chain Research
4. Hydrogen Projects Ascend in 2024
The clean hydrogen sector is experiencing global momentum in 2024, driven by maturing policies in Europe and the US, alongside commercial-scale projects in the Middle East, Australia, and Africa. Beyond momentum, 2024 promises clarity with key feasibility studies unveiling new use cases for hydrogen consumption. Anticipate a surge in clean hydrogen project approvals and potential cancellations in the US, thanks to awaited tax credit regulations. Global auctions and grants will provide insights into pricing dynamics, technological advancements, and the emerging contenders in this transformative landscape.
Artem Abramov, Head of Clean Tech Research
5. Muted US Shale Growth Benefits OPEC
While oil prices remain elevated in the near term, evolving strategies in the US shale sector result in slower output growth. With no expected growth in shale investments in 2024, OPEC gains the ability to effectively regulate the market, potentially leading to extended periods of high oil prices.
Espen Erlingsen, Head of Upstream Research
6. Doubling Down on Renewable Growth
2024 is poised to be a record-breaking year for solar and wind markets, adding over 510 GW of solar PV and wind capacity globally. The resulting new generation from these sources, exceeding 900 terawatt-hours, is set to cover most of the growth in demand. While capacity continues to grow, governments must incentivize renewable energy projects to maintain momentum.
Carlos Torres Diaz, Head of Renewables & Power Research
7. Emergence of OPEC+ in Refined Products Markets
China’s downstream oil sector signals a shift with a move from quarterly to annual crude import quotas, introducing product export allowances for independent refiners. This strategic shift enhances flexibility, injecting volatility into crude procurement and product exports. The potential rise of a supply management framework in the refined products market, akin to OPEC+, is a trend to watch in the coming year.
Mukesh Sahdev, Head of Downstream
8. Offshore Wind’s Long-Term Resilience
Despite challenges faced in 2023, offshore wind projects are not out of the woods yet, with a robust long-term outlook. Authorities are supporting long-term goals with improved terms in auctions and industry-specific inflation adjustments. The flattening of inflation and governmental commitments, with increased auction volumes and emphasis on supply chain efficiency, contribute to maintaining the energy transition journey.
Alexander Flotre, Vice President & Head of Offshore Wind
9. Coal Generation Decline in 2024
Global coal-fired power generation is expected to decline in 2024, influenced by evolving Asian power grids. A predicted 0.3% annual decline, equivalent to 33.7 terawatt-hours (TWh), is significant as 2023 marks the high watermark for global coal power. China, India, and Indonesia, the leading coal consumers, will experience a shift towards fossil-free alternatives due to surging new renewable energy capacity installations and aging coal plants.
In navigating the dynamic energy landscape of 2024, these nine factors will play pivotal roles, steering the industry through disruptions, challenges, and opportunities.
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