This year is already proving to be a critical and redefining one for the global energy sector. New political governance and regional affiliations that expose both significant challenges and unprecedented opportunities will require careful navigation of a complex and changing landscape. A forward-thinking approach that embraces innovation, sustainability and resilience will be essential.
While uncertainty looms over some regions and industries, the commitment to actionable solutions and pragmatic approaches will be key. The development of frameworks such as the product carbon footprint (PCF) calculations exemplifies the industry’s move toward measurable and impactful actions. Sustainability remains a critical focal point, albeit with a shift in urgency and approach. The recent exits of key investment institutions from sustainable finance alliances and the recalibration of environmental, social and governance (ESG) commitments by global corporations have sparked debates.
Looking ahead, it is evident that the energy sector is on the cusp of transformation. The journey will be marked by challenges, but also by opportunities to innovate and adapt. By understanding and leveraging these trends, the lubricants industry can navigate the complexities of 2025 and emerge stronger, ready to meet the demands of a rapidly evolving energy sector.
Here are key trends that will be in the 2025 spotlight.
Trend one: A divided developed world: U.S. re-industrialization versus EU de-industrialization
In 2025, the U.S. and the European Union (EU) are on different industrial development paths. The U.S. is re-industrializing, bringing manufacturing back home, while the EU faces de-industrialization. This shift will impact global value chains, changing where products are made and traded.
The U.S.’s efforts may boost domestic production and jobs, while the EU might face economic challenges needing policy changes. Europe’s de-industrialization threat is due to high energy costs deterring investment. Energy-intense artificial intelligence (AI) training and data centers further strain Europe’s digital production, with data center electricity demand expected to rise by 28% by 2030. Decarbonization costs for major industries could threaten the European Green Deal if it leads to de-industrialization. Geopolitical tensions and trade reshuffles have led to smaller ships for regional trade, over large global routes.
Trend two: Automotive industry: The good, the bad and the ugly
The automotive industry is undergoing significant transformations, with both positive and negative developments. On the positive side, hybrids are gaining prominence, contributing to global decarbonization efforts.
However, for EU OEMs, the situation is less favorable. OEMs have faced a testing year in 2024, and more difficulties are expected in 2025 as they encounter additional challenges, including tariffs, protectionism and short-term policies aimed at ensuring survival. The automotive industry is crucial for economies like Germany, and these pressures will have ripple effects throughout the lubricant value chain. Suppliers and partners will need to navigate this complex landscape, balancing the need for innovation with the realities of a challenging market environment.
Car battery production is a significant bottleneck and competitive factor. Chinese electric vehicle (EV) OEMs can compete due to exceptionally low battery costs and government support, while the EV battery supply chain in the U.S. and EU has faced setbacks. The Inflation Reduction Act had provisions to benefit local content, but China continues its stance to withhold key technologies and materials, creating further uncertainty and tension between the East/West divide.
Trend three: Niches will enter the spotlight
While mainstream value chains remain essential for maintaining materiality, emerging niches are capturing attention as potential growth areas. These speculative but promising sectors offer opportunities for innovation and investment. For example, immersion cooling fluids for data centers and fluids for battery charging infrastructure are gaining traction. Advances in commercial space exploration and new mobility modes, such as drones and air taxis, are also driving conversations at the highest levels.
These futuristic areas, once considered niche, are now becoming integral to discussions about the future of the lubricant industry. As these technologies evolve, there is a growing need to explore how the lubricant industry can contribute to these opportunities. This shift requires a forward-thinking approach, positioning the industry to capitalize on emerging trends and drive growth in new and exciting directions. Innovation and a reimagining of what and how the lubricants industry can offer in response to these evolving needs will be a determining factor in helping companies to not only survive but thrive.
Trend four: Is sustainability facing a reset or setback?
The sustainability landscape is undergoing a reset, with key investment institutions exiting sustainable finance alliances and global corporations revising their ESG commitments. This shift raises questions about the urgency and focus on sustainability that has dominated headlines in recent years. However, this reset may present an opportunity for companies to concentrate on technologies and solutions that align with consistent political commitments and proven results.
In the lubricant value chain, frameworks like the PCF calculation for lubes, developed by key industry associations, provide a basis for measuring what truly matters. This focus on actionable specifics rather than broad commitments may help navigate the short-term challenges until the pendulum swings back toward sustainability. Additionally, areas that started as subsidy-driven markets, such as renewable energy, are now standing on their own feet, offering further opportunities for growth and innovation.
Conclusion: How geopolitics and economic shifts will reshape the energy sector
As shown, there are significant tensions playing out within a complex global landscape. Value chains and trade dynamics are being reshaped and the impact on both traditional and emerging markets will have considerable implications for the lubricant industry, as well as the broader energy sector.
The evolving dynamics of emission reduction, alternative fuels and the shifting geopolitical landscape underscore the need for adaptable strategies. Companies must be prepared to pivot in response to regulatory changes, policy shifts and market demands. The emphasis on sustainable practices, particularly in sectors like aviation and automotive, will drive investment in cleaner technologies and more efficient processes. 2025 will certainly be an interesting year.
Milind Phadke is Vice President Energy at Kline + Company. You can reach him at milind.phadke@klinegroup.com.
Kline + Company is an international provider of world-class consulting services and high-quality market intelligence for industries including lubricants and chemicals. Learn more at www.klinegroup.com.