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      In a connected world, the energy, natural resources and chemicals sectors are impacted significantly by geopolitics. Respondents to the KPMG 2024 Energy, Natural Resources and Chemicals CEO Outlook rank geopolitical complexities (55 percent) as the top challenge facing their companies, followed by economic uncertainty (43 percent)1.

      As part of the Top geopolitical risks 2025 paper from KPMG International, this report considers the risks – as well as the opportunities – from tariffs, competition for resources, a heightened regulatory environment, supply chain disruption, climate change, and other phenomena. In the midst of geoeconomic confrontation and a decline in the effectiveness of international rulemaking, corporate leaders need to monitor geopolitical shifts and continue to adapt to constant change.

      KPMG’s midyear check-in comes at a pivotal moment. Heading into the second half of 2025, the economic and geopolitical signals are intensifying. From global competition and evolving transatlantic trade talks to shifting conflicts and tariff regimes, companies are navigating a complex web of global uncertainty that shows no signs of dissipating.

      KPMG’s recent global paper Energy transition investment outlook: 2025 and beyond surveys 1,400 senior executives from companies actively investing in the energy transition. More than two-thirds (72 percent) of respondents say that, in spite of high interest rates and geopolitical volatility, investment in energy transition assets is increasing rapidly. However, 75 percent continue to invest in fossil fuel energy – indicating that a mix of traditional and renewable energy may persist for some time.2 As the 2025 Statistical Review of World Energy (produced in collaboration with KPMG) reveals, the demands of an energy-hungry world are driving growth in both renewables and oil, gas and coal, as part of a disorderly energy transition.3

      The chemicals sector is experiencing a long down-cycle, and our conversations with senior execs in this industry suggest no immediate end in sight. Indeed, the specter of high inflation and interest rates and low growth threaten profitability across capital expenditure-intensive industries like energy, natural resources and chemicals.

      The report is intended for independent boards of directors and senior business executives, particularly Chief Executive Officers, Chief Risk Officers and other key decision-makers responsible for strategic planning and risk management within energy, natural resources and chemicals companies.

      Five key geopolitical risks and trends facing energy, natural resources, and chemicals companies

      Tectonic shifts in power, economic centers and trade

      As a primary input to every aspect of human life, energy is at the center of geopolitical change, with the growing demand for electricity to power data centers driving renewable energy production. Despite its abundance of fossil fuels, the US needs all energy sources to power its drive towards electrification for electric vehicle (EVs), data centers and cooling. China currently leads the manufacturing of solar panels, wind turbines and batteries, and has tied up much of the access to the rare earth minerals that underpin renewable energy sources. China is also soaring ahead in its bid to become energy-independent, adding double the amount of renewable energy of the US, Europe, and India combined in 2024. Europe, on the other hand is energy poor and requires alliances to secure supplies. Additionally, renewables momentum in Europe has stalled somewhat, with growth of just 7 percent in 2024, due to high financing costs, supply chain bottlenecks and permitting obstacles.4

      Although clean energy has huge potential, it is subject to intense competition, putting a downward pressure on returns – including in China, where the government has put floors on renewable energy and EV prices to prevent extreme competition. The renewables sector is in danger of suffering “involution” – a race to the bottom, characterized by sales growth yet declining margins.

      Tariffs are forcing a radical rethink of where companies source both their energy and the materials that help produce energy. Increased transnational professional mobility challenges may also exacerbate skills shortages and labor cost predictability.

      In the face of tariffs, supply chain disruption, and geopolitical uncertainty, business and investor confidence has fallen, which has weakened demand and lowered prices for crude oil, petrochemicals, and coal. A decline in global trade, as well as a recession, could even reduce demand for energy – especially oil and gas – directly impacting the sector’s revenue. On the other hand, with countries like the US aiming to produce more fossil fuels, production could potentially rise, although excess production could cause costs to fall, which again hits margins. Peak oil may be a few years away, but we may already have reached peak oil prices.  

      Geopolitical leaders are increasingly signaling long-term decoupling in critical sectors. “The trajectory of international relations will likely impact the business environment significantly,” noted Stefano Moritsch, KPMG Global Geopolitical Lead. He pointed to ongoing tensions, transatlantic negotiations, and a shifting trade architecture as key developments for the remainder of 2025. The US has threatened to impose punitive tariffs on importers of Russian oil, should Russia fail to agree a peace deal with Ukraine. Such moves signal confidence that swings production in other regions (including the US) can fill the gap to satisfy demand.5 In South America, the Mercosur trading bloc between Brazil, Paraguay, Uruguay and Argentina could be under threat if the latter were to leave to secure a trade agreement with the US. Argentina's departure could reduce regional energy trade in natural gas and electricity, slowing down the renewable energy transition. 

      Centers of oil and gas generation, namely the Middle East, are striving to reduce their dependence on energy for national revenue, and are encouraging foreign business, commerce and leisure investment. Nevertheless, these countries currently rely heavily on oil income, and, after a couple of years of production quotas, the Organization of the Petroleum Exporting Countries (OPEC) has signaled its intent to release barrels to the market,6 which would push down prices further.

      Opportunities for energy, natural resources and chemicals companies

      The mining sector is attracting demand from international investors for materials – like nickel – crucial to batteries and other renewable energy components. This spells positive news for businesses in mineral-rich regions. Latin America, especially Brazil, is pushing ahead fast in renewables, presenting opportunities for investment in this sector. Globally, the renewables market should continue to flourish to keep up with the cloud and AI revolution, and give countries greater energy security. Nuclear power may also enjoy a boom, to reduce reliance on energy imports. For the first time in several years, nuclear power rose as a proportion of total global energy generation in 2024, to 5 percent, mainly due to increased output in France and Japan.7 The Eurasia Group’s Top Risks 2025 argues that even if the move to renewables stalls, “…the global energy transition — which includes both renewables and nuclear — will power forward.”8

      Any rise in fossil fuel production creates demand for major projects, especially refineries in countries like the US, which has limited capacity. As the world becomes less globalized, energy, natural resources and chemicals companies may need to pivot to new regions, ‘friendshoring’ and localizing their supply chains, and adapting to new regional alliances.

      A complex, fragmented regulatory and tax environment

      Regulations and tax are evolving at different speeds in different geographies. The U.S., for example, is rolling back many sustainability regulations. Minimum global tax is becoming adopted by many countries, while others are withdrawing from multilateral tax policy. 

      A fragmentation of tax regimes, along with sudden changes, creates greater uncertainty over return on investment (ROI) in different markets – and could slow corporate investment cycles. It can be a challenge for international energy, natural resources and chemicals companies to keep up with the fast pace of change. According to the KPMG 2024 Energy, Natural Resources and Chemicals CEO Outlook, trade regulation is the number one factor (73 percent) likely to impact organizational prosperity over the next three years.9

      In the US, for instance, businesses that have made investments on the back of Inflation Reduction Act (IRA) incentives are likely to be impacted by the ‘One Big Beautiful Bill Act,’ which is hastening the end of tax breaks for solar and wind projects, as well as for EVs and residential energy efficiency.10 This creates uncertainty, not least because of the sizeable foreign investment in the renewables sector. In many other parts of the world, however, the push for decarbonization is expected to persist, with favorable government conditions.

      Even though China is yet to implement global minimum tax, Chinese energy companies involved in making solar panels, wind turbines and batteries in other countries could still receive higher tax bills, which could cause a rethink of where they invest.

      Strict environmental standards in some geographies restrict extraction and production of critical minerals, which could leave companies trailing competitors in countries with more relaxed regulations. In regions like Europe, the innovative potential of artificial intelligence (AI) could also be held back by strict regulations.

      Diane Swonk, Chief Economist at KPMG US, emphasized the indirect costs of policy uncertainty, warning: “Uncertainty is its own tax on the economy. Businesses must track macroeconomic indicators closely, particularly in this regulatory flux.”

      Opportunities for energy, natural resources and chemicals companies

      A rolling back of regulations in the US could lessen bottlenecks such as permitting and accelerate the progress of major energy projects to meet the data center thirst for electricity. And US liquid natural gas (LNG) companies should continue to increase their exports to countries keen to reduce the trade gap with the US. In recent years, the US has stepped up to become the world’s largest LNG exporter, filling the gap left by Russia.11

      Global cooperation on climate change, including the Paris Agreement and Climate Promise 2025, can drive investment in renewable energy and promote sustainable development.

      Energy, natural resources and chemicals companies should understand performance levers, to embed their capacity to adapt and respond to regulatory and tax changes and monitor developments. Companies should continually review their asset portfolios, to acquire or dispose of assets to adapt to evolving tax structures.

      A fast-moving and politicized technology landscape

      Shifting alliances (based upon national security concerns) and fragmented regulations add complexity to technology investment decisions. Regulators are struggling to keep pace with new Generative AI (Gen AI, referred to simply as AI below) solutions. China’s dominance of critical minerals supply chains and processing gives it significant control over chips and their component materials.

      The US seeks continued technology leadership, putting pressure to build out data centers at pace and develop domestic chip manufacturing capabilities to counter a possible shortage of essential technologies.

      AI has the potential to be a game-changer in optimizing grid efficiency and distribution. AI/Gen AI can help radically improve and scale up renewable energy systems, identifying optimum locations for wind and solar facilities, monitoring performance, providing predictive maintenance, and enhancing grid efficiency.

      However, national security concerns could slow down AI adoption, if it results in companies having a limited selection of suppliers. Geopolitical competition in AI and other technologies (like quantum computing) is creating technological blocs around the US and China, jeopardizing international cooperation and access. Data protection and privacy regulations are also obliging energy, natural resources and chemicals companies to use local cloud and data center providers, in certain instances.

      Nancy Chase, Risk Management Leader, KPMG Canada, highlighted the role of AI in dynamic scenario planning. “Leveraging data to model and understand potential impacts is essential, as companies aim to maintain real-time visibility in a rapidly evolving tech environment.”

      Data centers, and AI factories used to power AI, have a huge thirst for energy, which, is placing immense pressure on energy systems around the world. In the recent KPMG US paper From crisis to opportunity, 76 percent of respondents believe electricity usage in data centers will increase by more than 10 percent annually over the next decade. And 57 percent feel the current pace of energy development is too slow to meet increased demands for electricity from the growth in data centers.12

      At the same time, AI has potential to improve energy-efficiency, dramatically reducing the amount of energy required to cool data centers and other buildings. As energy security and independence become ever bigger government priorities, the energy demands of AI put the spotlight on energy security and self-sufficiency.

      Opportunities for energy, natural resources and chemicals companies

      By creating modular, adaptable IT infrastructure, companies across the sector can build technology stacks that meet national regulatory standards, whilst maintaining a global design. This might include clustering platforms, data centers and other tech, and diversifying into cloud services distributed across multiple geographies, to avoid regulatory and security issues. By building alliances with critical suppliers, they can help ensure availability of key hardware, and scale up major energy projects, especially in renewables. Our KPMG Global tech report 2024 finds that 86 percent of organizations plan to invest in cloud ‘as-a-service’ (XaaS) over the next year.13 Technology alliances are playing a critical role in scaling major energy projects, especially in renewables.

      Energy, natural resources and chemicals companies can also build trust in AI by respecting local sensitivities. And, amid rising cybersecurity threats from malicious nation-state actors, investment in cybersecurity can strengthen critical infrastructure and enterprise systems.

      Multiple threats to supply chains, assets and infrastructure

      Geopolitical rivalries, trade protectionism, conflict, competition for resources, cyberattacks, and climate events place severe strains on globally exposed energy, natural resources and chemicals companies. Wars and tensions pose rising threats to key shipping choke points. Countries are adopting protectionist measures to safeguard and diversify their energy and critical minerals supply chains. However, after almost two years of conflict in the Middle East, energy prices have remained largely stable, with only temporary fluctuations. Even in Europe, where the war in Ukraine has raged since 2022, prices stabilized once LNG supplies reoriented.

      Energy infrastructure is under a constant and growing cybersecurity threat (often from nation states), heightened by the retreat from globalization, with the world evolving into geopolitical blocs of ‘friendly’ countries. The increasing number of climate events, such as floods, fires and hurricanes, are damaging assets, particularly power and utilities facilities. Not surprisingly, extreme weather events are considered one of the top risks in the World Economic Forum’s (WEF) Global Risks Report 2025. Looking 10 years ahead, the WEF’s top three risks are all environmental: extreme weather events; biodiversity loss and ecosystem collapse; and critical change to earth systems.14

      According to our KPMG International report Turning the tide in scaling renewables, 84 percent of respondents say geopolitical challenges are causing substantial delays in, or even the abandonment of renewable energy projects. Additionally, 61 percent of renewable energy industry stakeholders cite supply chain risks as a significant obstacle to scaling renewable energy projects.15 As the main supplier for solar equipment, China holds many cards in the renewables race, and geopolitical tensions could disrupt exports and stall other nations’ green energy progress.

      Dr. Brendan Rynne, Chief Economist for KPMG in Asia Pacific, warned of region-specific pressures from tariffs and Japanese bond yields. “The impacts on South Korea and Japan will be pronounced, signaling that shifts in trade dynamics may accelerate in late 2025.”

      With limited finances, power and utilities companies have to build out infrastructure to satisfy growing demand, while also burying power lines to make grids more resilient. This puts pressure on investment priorities, while regulations can hinder their ability to raise prices to fund these investments. Energy companies may also suffer regulatory penalties for disruption to services or failure to prevent damage. Insurance is a further challenge, with companies struggling to cover their assets against extreme weather events.

      One of the main bottlenecks to expanding mineral extraction is refining and processing, which takes time to develop. Countries with their own reserves want to move down the value chain from exploring to refining and production, and seek investments to enable this shift.

      Opportunities for energy, natural resources and chemicals companies

      Creating circular supply chains and production can help reduce dependency on raw materials, by embedding re-use and recycling into the design of products and infrastructure – including waste energy recycling systems. And companies can diversify sources of important minerals to hedge against supply chain disruption. Governments in mineral-rich nations are also likely to encourage investment in downstream value chains, notably refining and processing.

      Additionally, it’s vital to invest in protecting assets and infrastructure against wind, flooding, forest fires and drought, to strengthen existing infrastructure and, where possible, construct new facilities in safer locations. Companies can formalize their risk policies and monitoring, and use software to improve their climate modeling, assess potential climate scenarios, and quantify their exposure to these risks.

      Demographic, technological, and cultural pressures on workforces

      The demographic timebomb of an aging population is impacting workforces in many geographies. With older workers retiring, a decline in apprenticeships in some markets, and younger workers less likely to join or stay in the sector, companies are finding it hard to access the skills they need. And, with automation replacing many manual tasks, the reliance on technical skills increases operational vulnerability. For example, drones and internet of things (IoT) devices and sensors have huge possibilities for surveyance, maintenance and construction, but require people with expertise to manage and oversee their use.

      Respondents to the KPMG’s Global 2024 Energy, Natural Resources and Chemicals CEO Outlook say that a lack of technical capability and skills (43 percent) is the second biggest barrier to implementing Gen AI.16 Additionally, efforts to reduce immigration decreases the availability of migrant labor.

      Yael Selfin, Chief Economist for KPMG UK and for the Europe, Middle East and Africa regions, emphasized the demographic and technological trends with greater certainty: “Rather than wait for clarity on trade policy, businesses should act now on high-certainty areas like public debt, aging populations, and technology evolution.”

      Opportunities for energy, natural resources and chemicals companies

      There’s a growing interest in renewable energy as an exciting career, both in terms of cutting-edge technology and combating climate change, positioning the sector as a critical part of the solution to the energy transition. Companies in this sector can highlight the potential benefits to attract a new generation of talent.

      Organizations should also seek to shape a dynamic and adaptable workforce through upskilling, virtual learning and organizational redesign. A balanced, hybrid work environment, with a rebooted employee value proposition, can help satisfy the expectations of younger workers.

      Geopolitical risk management as a way of life

      Faced with continued volatility and uncertainty, energy, natural resources and chemicals companies can gain a competitive edge, by treating geopolitical risk as an asset as well as a threat. This means assessing both the opportunities and the potential negative impacts of the five key risks outlined in this paper:

      • Companies can address tectonic shifts in power, economic centers and trade through continued focus on the energy transition, and by seizing fresh opportunities in fossil fuel and minerals extraction and refining.
      • In response to a complex, fragmented regulatory and tax environment, organizations can improve their monitoring capabilities, review asset portfolios and adapt to renewable energy tax incentives.
      • Investment in cybersecurity, trusted use of AI, selective technology partnerships, and modular IT infrastructure can help companies adapt to a fast-moving and politicized technology landscape.
      • Amidst multiple threats to supply chains, assets and infrastructure, energy, natural resources and chemicals companies should create circular business models and invest in making assets more resilient.
      • Demographic, technological, and cultural pressures on workforces present opportunities to highlight the use of exciting new technologies in sectors like renewables.

      Amidst prevailing uncertainty, the one silver lining for energy and resources companies is continued energy demand growth. In such an environment, those businesses with disciplined capital allocation, robust planning and operations processes, and cost management capabilities, should be well-positioned to take advantage of opportunities.

      1 KPMG 2024 Energy, Natural Resources and Chemicals CEO Outlook, KPMG International, 2024.

      2 Energy transition investment outlook: 2025 and beyond, KPMG International, 2025.

      3 2025 Statistical Review of World Energy, Energy Institute, 2025.

      4 2025 Statistical Review of World Energy, Energy Institute, 2025.

      5 ‘Trump's sanctions threat looms over Russian oil exports to China, India and Turkey’, Reuters, July 15, 2025.

      6 Saudi Arabia, Russia, Iraq, UAE, Kuwait, Kazakhstan, Algeria, and Oman reaffirm commitment to market stability on current healthy oil market fundamentals and steady global economic outlook and adjust production, OPEC press release, July 5, 2025.

      7 2025 Statistical Review of World Energy, Energy Institute, 2025.

      8 TOP RISKS 2025, Eurasia Group, January 6, 2025.

      9 KPMG 2024 Energy, Natural Resources and Chemicals CEO Outlook, KPMG International, 2024.

      10 KPMG TaxNewsFlash: KPMG reports: Tax subtitle for “One Big Beautiful Bill”, July 2025.

      11 2025 Statistical Review of World Energy, Energy Institute, 2025.

      12 From crisis to opportunity, 2024 Data Center Survey, KPMG US LLP, 2025.

      13 KPMG global tech report 2024, KPMG International, 2024.

      14 Global Risks Report 2025, World Economic Forum, 2025.

      15 Turning the tide in scaling renewables, KPMG International, 2023.

      16 KPMG 2024 Energy, Natural Resources and Chemicals CEO Outlook, KPMG International, 2024.

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