Fossil fuels aren’t going anywhere. Oil, natural gas, and coal are set to represent about half of global energy consumption in 2050 and beyond, according to the tenth annual McKinsey report, which showed the biggest shift in the consultancy’s thinking on energy systems in a decade.
McKinsey’s Global Energy Perspective 2025 offers “a chance to reflect on the lessons learned over the past decade and to look ahead to the next one,” the consultancy said.
The reflection revealed that of the three energy system priorities – affordability, reliability, and sustainability – the lack of affordability, as well as bankability, is holding back the widespread adoption of new low-carbon technologies.
“First, cost competitiveness and an economically pragmatic energy transition remain paramount,” McKinsey noted in this year’s report.
“Second, there is no silver bullet for decarbonization. Countries and regions will follow distinct trajectories based on local economic conditions, resource endowment, and the realities facing particular industries,” McKinsey said.
The consultancy’s 2025 report comes after years of other consulting firms and most notably, the International Energy Agency (IEA), advocating for a rapid energy transition to slash emissions and predicting peak oil demand by 2030.
McKinsey’s new report notes that “geopolitical uncertainty, shifting policies, and increasing demand for power are reshaping the energy landscape.”
All three factors will lead to prolonged use of fossil fuels to meet demand, even beyond 2050.
Fossil fuels, especially natural gas, are projected to retain a large share of the global energy mix “well past 2050,” McKinsey’s report found.
Oil, gas, and coal are still set to represent between 41% and 55% of global energy use in 2050, according to McKinsey.
This share would be lower compared to the current share, but higher than previously expected.
Natural gas, which will see growth in use for electricity generation, as well as for final consumption, is expected to post the strongest demand increase, displacing higher-emission fuels in many cases. Coal use may also persist at higher levels than seen in previous McKinsey outlooks, depending on the scenario, the consultancy said.
Moreover, “crucial alternative fuels are not likely to achieve broad adoption before 2040 unless mandated,” McKinsey said. The affordability issue would suggest that some alternative sources, such as green hydrogen and some other sustainable fuels, “may not be competitive with traditional fuels in the near term.”
McKinsey acknowledges that energy security and reliability are trumping sustainability amid geopolitical upheavals and uncompetitive emerging low-emission technologies.
The new energy perspectives report makes the calls from OPEC for continued investment in oil and gas more relevant and mainstream than in previous years. A few years back, the calls for increased oil investment from some of the world’s biggest oil producers were dismissed and downplayed by the IEA and other forecasters, expecting net-zero to drive energy policies, instead of affordability, security, and reliability.
The oil industry must step up exploration and investment in new supply; otherwise, the world risks a supply shortage, Amin Nasser, the chief executive of the Saudi state oil giant Aramco, said last week.
“We had a decade . . . where people didn’t explore. It’s going to have an impact,” Nasser told the Financial Times.
“If it doesn’t happen, there will be a supply crunch,” said the top executive of the world’s biggest oil firm by both production and market value.
Also last week, Nasser said in a speech at the 2025 Energy Intelligence Forum that the energy transition faces a reality check and reality on the ground points not to an energy transition, but to “an energy addition which requires all hands on deck.”
“We also see resilient demand, and the pressing need for long-term investments in supply is now widely accepted,” Nasser said.
In recent months, energy security and affordability have trumped fears of stranded assets, prompting the world’s biggest international oil and gas firms to shift focus back to exploration after years of trying to develop clean energy solutions.
Sourced from Oilprice.com