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The International Energy Agency (IEA) has revised its global oil demand growth forecast for 2025, predicting a sharp slowdown due to the impact of US tariffs, reported Tom Wilson in the Financial Times. The agency cut its 2025 growth forecast by around a third, from 1.03 million barrels per day to 730,000 barrels per day. The decline is mainly due to weaker demand in the US and China, alongside a reduction in the IEA's global economic growth expectations, which have been lowered to 2.4% for this year, down from 3.1%. These shifting dynamics signal heightened volatility in global oil markets, with ongoing trade tensions adding further uncertainty to the energy sector. (Financial Times)
Why does this matter? The slowdown in global oil demand growth, as predicted by the IEA, carries significant implications for economic stability and energy markets. Lower growth expectations, especially in critical markets such as the US and China, can lead to price volatility, impacting both producers and consumers. This could also dampen investments in the energy sector, slowing technological advancements and reducing overall energy security. These changes are reshaping the global energy landscape, influencing the strategies of both traditional oil companies and those focusing on renewable technologies.
For companies such as Rio Tinto, which is committed to supporting the renewable energy transition, shifts in oil dynamics are important. Changes in oil demand and therefore price could influence strategic decisions and long-term profitability. While Rio Tinto’s focus is on minerals for green energy technologies, fluctuations in oil prices are part of the broader energy ecosystem, impacting their market outlook yet reinforcing the need for alternative global energy geographies.
BP’s recent strategy reset, which aims to stabilise its financial performance, faces mounting pressure due to the falling oil prices. The company’s projections were based on an oil price of $70 per barrel, but prices have now dropped below that threshold, currently hovering around $64 per barrel. BP's efforts to boost cash flow and reduce debt through $20bn in asset sales are under strain. BP’s rivals, such as Shell, are better positioned to weather the downturn, raising questions about BP's ability to maintain its strategy. The situation underscores how oil price fluctuations can impact oil majors' strategies, forcing them to adapt to the evolving market.
Meanwhile, in Europe, a significant transformation in energy policy is taking place. For example, the Czech Republic has officially ended its dependence on Russian oil, a move driven partly by the war in Ukraine. The country now sources all its oil from Western countries, notably Norway, following capacity upgrades to the Transalpine (TAL) pipeline. The shift highlights Europe’s broader push for energy diversification, reducing reliance on Russian energy supplies. The TAL pipeline is now sufficient to meet the Czech Republic's annual oil needs, with refineries switching to new sources.
The switch is part of a wider European effort to enhance energy security, with the EU set to achieve a record-breaking 89 GW of new renewable energy capacity in 2025, including 70 GW from solar and 19 GW from wind. Although delays in permitting and cuts to government support, particularly in France for rooftop solar, could slow progress, wind power is still expected to grow significantly.
The European Commission has also approved a €400m ($459m) Spanish aid scheme to support renewable hydrogen production. The initiative aims to build 345 MW of electrolyser capacity and produce 221,000 mt of renewable hydrogen, helping Spain meet its 2030 target of 12 GW electrolyser capacity. The project is part of the EU’s broader strategy to integrate renewable hydrogen into its energy mix and promote decarbonisation in key sectors such as industry, transport and energy. Similar efforts are being implemented in Germany, Austria and Lithuania under the European Hydrogen Bank, as part of the EU’s REPowerEU plan to reduce dependence on fossil fuels.
As Europe accelerates its green energy initiatives, these investments in renewable hydrogen and other renewable sources will be vital for meeting both climate targets and ensuring energy security.