The past two centuries have witnessed a remarkable surge in global energy availability, significantly enhancing living standards, extending life expectancy, and fueling economic growth. According to the Energy Institute, global primary energy consumption has increased approximately fifteenfold from 1900 to 2024, experiencing only brief interruptions followed by quick recoveries. A clear example of this pattern emerged during the COVID-19 pandemic, when global energy demand briefly dipped by 3.5% in 2020 before rebounding and reaching new highs across all major energy sources.
Looking ahead, the International Energy Agency (IEA) projects that global energy needs could increase by up to 20% by 2050. This growth is expected to be driven by emerging markets, the electrification of various sectors, and ongoing economic expansion. The role of electricity is particularly noteworthy; today, it accounts for approximately 20% of final energy use, but projections suggest it may more than double by mid-century, potentially approaching half of global final energy consumption under current and announced policies.
A key driver of this impending surge in electricity demand is the rising prominence of artificial intelligence and data-center infrastructure. For instance, McKinsey & Company estimates that global data-center electricity consumption could soar to 4,500 TWh by 2050, representing around 9% of total global electricity demand. OpenAI, a key player in AI technologies, has ambitious plans for AI-focused data centers, envisioning up to 250 GW of electrical capacity by 2033—comparable to India’s current electricity demand and roughly equivalent to the output of 250 nuclear power plants.
To meet energy demand at this unprecedented scale, substantial investments will be necessary in generation capacity, grid infrastructure, and firm power sources to maintain system reliability. While investment in electricity generation has seen an uptick, spending on grids, storage, and system flexibility has notably lagged behind. The IEA estimates that annual power-generation investment is around $1 trillion, while investment in grid infrastructure stands at approximately $400 billion. This disparity creates a structural imbalance, constraining transmission capacity and increasing electricity price volatility.
As battery storage technology expands rapidly, it remains inadequate for long-duration and seasonal balancing. Consequently, dispatchable energy sources like fossil fuels will continue to be crucial for system reliability. Even with the rising deployment of renewables, fossil fuels are projected to comprise about two-thirds of the global energy mix by 2050, down from around 80% today. This decline is primarily driven by coal’s diminishing role, which is expected to drop by roughly 13% by 2050. In contrast, renewable energy’s combined share is anticipated to increase from 15.4% in 2024 to 26.3% by mid-century, although these projections are sensitive to factors like grid constraints and the pace of renewable deployment.
While investment in electricity generation has accelerated, spending on grids, storage, and system flexibility has lagged.
Natural gas, often regarded as the least carbon-intensive and comparatively lowest-cost fossil fuel, is following a distinct transition path. It is projected to overtake coal as the second-largest energy source in the 2030s, contributing around 23% of global energy consumption by 2050. This incremental demand is largely concentrated in emerging economies, particularly in Asia and the Middle East, driven by the energy needs of power generation and industrial usage.
Gas will remain pivotal for system reliability, serving as a dispatchable complement to renewables. However, its future role will depend on sustained investments in upstream supply, pipeline infrastructures, liquefied natural gas (LNG) systems, and gas-fired power capacity.
Meanwhile, nuclear energy is experiencing a resurgence in interest, boasting a high capacity factor and near-zero direct emissions. Over 40 countries are currently developing new nuclear projects, with more than 70 reactors under construction. Nevertheless, factors such as capital intensity, long construction timelines, and regulatory complexities may hinder the pace of deployment, ultimately limiting nuclear’s share of global energy to around 6.6% by 2050, up from 4.8% today.
As for oil demand, it is predominantly fueled by transportation and is expected to plateau in the 2030s. The share of global primary energy sourced from oil is projected to decline only slightly from 30.6% to 29.8% by 2050, even as absolute oil demand continues to rise. The growth of demand is increasingly driven by sectors like petrochemicals, aviation, and mobility in emerging markets, particularly in India, Southeast Asia, and Africa, while demand in more advanced economies is on the downturn.
Despite perceptions of an oversupply in the near term, the long-term outlook is complicated. Global proven reserves indicate that we have more than four decades of supply; however, effective production is constrained by the decline of natural fields and chronic underinvestment in both exploration and infrastructure. Since 2019, nearly 90% of upstream oil and gas capital expenditure has been directed toward offsetting declines rather than expanding capacity, as per IEA’s findings.
Given that new oil fields typically require a decade or longer to reach first production, replacing lost output demands a significant increase in investment, service capacity, and risk tolerance—elements that are currently lacking.
In this complex landscape, the market often seems to undervalue energy as a critical driver of future economic growth. As of now, the energy sector represents only 3.3% of the MSCI World Index, while the five largest individual companies account for a substantial 19.3% of that index. This disconnect is concerning, particularly in light of the rising energy intensity of businesses reliant on vast amounts of power for their operations, including digital infrastructures and global logistics networks.
In terms of commodity pricing, a significant disparity has emerged. As it stands, one ounce of gold can now purchase roughly 80 barrels of oil—only briefly exceeded during the COVID-19 oil price collapse. Historically, this ratio has fluctuated between 10:1 and 30:1 for about 80% of the time since the 1860s. This trend raises pertinent questions about how markets are currently evaluating the fundamental role of the energy sector in sustaining long-term economic growth and system resilience.
Maksym Skotarenko is a research analyst and portfolio manager at Curmi & Partners Ltd.
The information presented in this commentary is solely provided for informational purposes and should not be construed as investment advice or as an offer or solicitation to sell, buy, or subscribe to any financial instruments…