Welcome to the last Energy Source newsletter of 2024, sent to you from New York!
Recently, the Federal Reserve reduced interest rates for the third time this year, but hinted that borrowing costs could stay higher than anticipated in 2025. This news caused a drop in the stocks of renewable energy companies, with the iShares Clean Energy ETF finishing 3.2% down. The renewables sector has been under pressure due to high initial costs, and with a new US president, Donald Trump, stepping in, there are more uncertainties for the upcoming year.
As we wrap up 2024, we reflect on key trends that shaped the energy landscape. These include stable oil markets, mergers and acquisitions in the US, increasing power demand, and the resurgence of nuclear energy. Wishing everyone a safe holiday season, Merry Christmas to those who celebrate, and a Happy New Year!
Stability in Oil Markets
Despite ongoing conflicts in Ukraine and Gaza, oil markets have remained surprisingly steady this year. According to Deloitte, 2024 was one of the most stable years for oil in the last 25 years. As of yesterday, Brent crude oil was priced at $73.39 a barrel, down slightly from $75.89 at the start of the year.
Industry expert Vikas Dwivedi pointed out that this year’s oil prices were largely influenced by supply, rather than demand, which has faltered largely due to a slowdown in China. As China’s economy faced challenges, including a weak property market, its demand for crude oil has been changing, with many consumers opting for electric vehicles.
Increased Electricity Demand
This year marked a significant awakening to the reality that the shift to a lower carbon and more digital economy will lead to a substantial rise in electricity use. The International Energy Agency (IEA) projects that global electricity demand will grow by about 4% this year, compared to 2.5% in 2023, equivalent to adding a whole nation’s consumption.
This increasing demand is driven by economic growth, hotter temperatures leading to greater air conditioning use, and a surge in data centers supporting AI technologies. In the US, consulting firm Bain has warned that electricity demand could outweigh supply within years, urging utilities to enhance power generation significantly to meet this rise.
Resurgence of Nuclear Energy
As companies seek a consistent, low-carbon power source, nuclear energy is making a comeback. Major tech firms like Amazon, Microsoft, Meta, and Google have recently invested in nuclear projects. Google is now the first major tech firm to commission new nuclear power plants to supply energy to their data centers, while Microsoft announced plans involving the reclamation of the Three Mile Island nuclear plant in Pennsylvania, known for its past incident.
However, integrating nuclear energy into the US power mix will require time, as the industry grapples with high building costs and regulatory hurdles. Though smaller modular reactors (SMRs) could be a part of the future, they still need to demonstrate their viability on a larger scale.
Continued Mergers and Acquisitions in US Oil and Gas
The US oil and gas sector saw a busy year of mergers and acquisitions. ConocoPhillips made headlines with a $22.5 billion purchase of Marathon Oil, enhancing its already extensive operations. Other notable transactions include Diamondback Energy’s $26 billion acquisition of Endeavor Energy and Chesapeake Energy’s $7.4 billion purchase of Southwestern Energy.
Even though the pace of deals slowed in the latter half of the year, experts suggest that the prospective business-friendly environment under Trump may encourage more activity in the sector, especially as potential changes at the Federal Trade Commission could boost approval for such mergers.
As we close the chapter on this year, the energy landscape remains dynamic and full of possibilities as we move into 2025.