Insights
2025 Oil and Gas Outlook
Posted November 15th, 2024 in Articles
It’s time for our annual look at the forecast for the oil and gas industry for the upcoming year. Here is what the U.S. Energy Information Administration (EIA) and other forecasters are predicting for 2025:
EIA Forecasts Drop in Oil Prices Amidst Increased Production and Reliance on Renewables
The EIA is forecasting a drop in oil prices through the end of 2025. Along with crude oil, this includes gasoline, as “[l]ower crude oil prices reduce [EIA’s] forecast prices for most petroleum products.” While the price of crude has remained relatively steady in 2024 (at $81 per barrel compared to $82 per barrel in 2023), the EIA currently predicts that the per-barrel price will fall to $78 next year. The EIA anticipates a slight decrease in the retail price of gasoline as well—dropping from $3.30 in 2024 to $3.20 in 2025.
Interestingly, this price reduction is accompanied by both an increase in production and an increase in reliance on renewables—at least in the United States. The EIA anticipates that production will increase to 13.5 million barrels per day (up from 13.2 million in 2024), while the share of U.S. electricity generation attributed to renewable energy sources will increase from 23 percent to 25 percent.
Fitch Ratings and IEA See 2025 as the Start of a New (and Permanent) Trend
Fitch Ratings and the International Energy Agency (IEA) both publish longer-term outlooks than the EIA, and this year they are both forecasting the start of a new (and permanent) trend toward reduced reliance on fossil fuels. Both organizations anticipate that demand for oil will drop precipitously through 2050—led by reduced reliance on gasoline-powered vehicles.
This drop in demand, they say, will coincide with a drop in price, with Fitch Ratings forecasting a per-barrel price of $70 in 2025, followed by a further reduction to $65 per barrel in 2026. Thereafter, the price may level out slightly as production and demand once again start to align—with producers and consumers alike beginning to adjust to what is expected to be the new normal.
This continues a trend that we discussed last year of outside factors playing an increasingly important role in the oil and gas industry. With renewable energy continuing to gain market share, and with governments around the world continuing to push for reduced emissions from vehicles, cargo vessels, and industrial and agricultural operations, the industry is arguably in its most vulnerable state in a very long time. At the same time, however, there is no question that oil and gas remain essential to the world economy—and this means there is no question that many commercial opportunities remain as well.
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Mithras Investments is a global consulting firm that works with Fortune 500 companies and other businesses involved in all segments of the oil and gas industry. We work with companies in the renewable energy sector and many other industries as well. If you would like to know more about our services, please call 305-517-7911 or request a consultation online today.
