In a disorderly energy transition, fossil fuels aren’t disappearing

Once seen as a transition fuel, gas has enjoyed a boom in demand and now accounts for more than a quarter of global supply – more than all renewables combined. Global gas demand rose by 2.5 percent in 2024, on the back of strong appetite in Asia Pacific, primarily China, Japan, and India. Gas production has increased by an annual average of 8 percent for the past decade, and in 2024, (when you exclude China), its growth rate outpaced that of renewables.

The US is out on its own as the world’s largest gas producer, generating 25 percent of global supply. However, China has enjoyed a remarkable ascent to fourth place, on the back of a surge in shale production. It now has the capacity to satisfy more than half (56 percent) of its domestic gas needs, driven by increasing gas-fired generation, and the shift of heavy goods vehicles from diesel to liquid natural gas (LNG).

As countries attempt to step away from trade with Russia, the US also retained its position as the world’s largest LNG exporter, with Qatar and Australia close behind. LNG has proved highly flexible, with US flows to Europe ramping up, to substitute for the radical fall in Russian supply. Meanwhile, production out of Australia and Southeast Asia has resumed its flows to China, South Korea and Japan. Gas pricing and commercial terms have reinforced its supply flexibility: as much as 35 percent of gas trade is now on spot contracts.

Oil is still, by some distance, the world’s single biggest source of energy, supplying one-third of global needs – although growth slowed to just 0.6 percent in 2024. On the back of shale extraction and operational efficiencies, the US has increased its production to become the top global producer, equaling output from Russia and Saudi Arabia combined. Guyana and Argentina also increased oil production significantly. Following sanctions, large quantities of Russian crude oil have flowed away from Europe to other parts of the world, especially China and India, while Indian oil products to Europe have, coincidentally, risen to fill the gap.

As a sign of things to come, however, China’s demand for oil declined by 1.2 percent as the country enthusiastically embraces electric vehicles (EVs) and LNG powered transportation.

Although oil is a core part of economic expansion in Southeast Asia and India, the rate of growth is slowing, suggesting that peak oil may be approaching.

Another energy source defying expectations is coal, which reached record demand levels in 2024 – the vast majority (83 percent) from Asia Pacific, with China accounting for 67 percent of total demand. Despite its huge growth in renewables, China’s electricity grid remains dependent on coal for 58 percent of its generation. In Europe, by contrast, coal consumption dropped by 7 percent, and has for the first time been overtaken by nuclear power as a source of energy. It was a similar story in the US, which recorded its lowest level of coal production for over 44 years.

Developing countries continue to depend on oil and coal to meet their rising energy needs. Africa lags far behind other continents in renewables (2 percent of demand versus oil and coal’s 64 percent). India still sees coal as a vital part of its energy mix, as evidenced by a 4 percent rise year-on-year.

The fast pace of renewables development cannot keep up with growing demand, which means that fossil fuels and clean energy will coexist for longer than expected. Energy strategies are being influenced not just by decarbonization, but by a need for greater security and reliability of supply.

We can expect further wide, regional variations in the energy transition, but one overall trend is clear: the pace of change is subject to continued constraints, and we will be reliant on fossil fuels for years to come.