Fossil Fuel Investment Set to Decline in 2025
The International Energy Agency (IEA) has forecasted a 6% reduction in oil production investment this year, marking the most significant drop since 2016, excluding pandemic years. This decline reflects subdued oil prices and weakening demand worldwide.
Factors Driving the Investment Downturn
Oil prices have fallen from approximately $82 a barrel in mid-January to around $65, prompting reduced investment from key producers. US shale operators, responsible for about 15% of global oil investment, are especially impacted, with expected spending cuts of 10% in 2025.
Major international oil companies are also scaling back investments, focusing more on shareholder returns than on launching new projects. This shift elevates the role of state-backed oil companies, particularly from West Asia and Asia, which now represent 40% of global oil and gas investments, up from 25% a decade ago.
Decline in Clean Energy Investment Among Oil Majors
Investment in low-emission technologies by traditional oil companies has fallen by 25% in 2024, totaling $22 billion. Despite growing global commitment to clean energy, overall spending in fossil fuels remains high but declined to an estimated $1.1 trillion in 2025, compared to the $2.2 trillion projected for renewables, nuclear, batteries, power grids, low-emission fuels, and energy efficiency combined.
Coal Power Expansion in Asia Despite Global Trends
While advanced economies have paused new coal power installations for the first time, coal-fired generation is expanding in countries like China and India to address rapidly increasing electricity demand. The IEA notes that coal additions in China are mainly motivated by energy security concerns after recent challenges with hydropower reliability during extreme weather.
Renewable Energy Outlook in the United States
In the US, increasing electricity needs driven by artificial intelligence and data centers are expected to boost demand for renewables, natural gas, and nuclear power. Energy research firm Enverus highlights that 517 gigawatts of planned renewable projects in the US still qualify for federal tax incentives, with an additional 284 gigawatts pending credits. If development continues at current rates, this capacity supports more than six years of build-out activity.
