Energy security is the US watchword – bad news for oil exporters

What to make of The New Joule Order by Jeff Currie and James Gutman at Carlyle, the US private equity behemoth, as they consider the future of energy demand? Where does their thinking leave us here in the Arabian Gulf?

Currie, a former head of global commodities research at Goldman Sachs, and Gutman point out that global energy consumption has grown by 2.5 percent annually over the past 60 years.

That is not going to change as people grow richer and power-hungry data centres stride to the fore. The two analysts are at pains to point out that fossil fuels are not going away. But we are now seeing peak oil trade, Currie and Gutman believe.

The share of global energy consumption that came from fossil fuels which crossed borders peaked in 2017, they say, and has since declined by 5 percent.

And the two analysts argue – forcibly – that secure local energy production will be at a premium. This has been reinforced by Russia’s invasion of Ukraine.

Moreover, Currie and Gutman say the arrival of Donald Trump in the White House marks the end of US willingness to underwrite international security either physically in terms of the seaways or financially in terms of the dollar.

The post-war Bretton Woods settlement, they argue, was necessitated by US reliance on energy imports. That has all changed.

The accent now will be on energy security. China has always prioritised this and the US is now in a position to do so. Europe, however, is highly exposed. Fossil fuel imports account for 54 percent of the continent’s energy supply, Currie and Gutman say.

China is transitioning towards domestic security via nuclear, renewables and local fossil fuels faster than expected – although 25 percent of demand still comes from abroad.

Conclusions? Well, oil is not the place to be. Nor oil tankers. That is not great news for oil exporters who have been hoping that Chinese demand will ride to the rescue and boost prices.

My colleague Sunil Singh reported last month that oil’s share of the global energy mix has hit a historic low, falling below 30 percent of demand for the first time, according to the International Energy Agency. As we all know, the IEA has form when it comes to the transition and talking down oil, but the Carlyle analysis broadly shares that view.

Another takeaway from The New Joule Order may be that Europe is the place to market to. But even here – Currie and Gutman do not address this – the news is not great. We can thank the Houthis for that. As my colleague Eva Levesque reported in January, Middle East oil exports to Europe fell by nearly a quarter in 2024, replaced by US and South American supplies.

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What of gas? We know that plenty of Arab Gulf states – Qatar, the UAE and Oman notably – are betting on LNG and that it is widely viewed as a successful transition fuel, albeit one where there is likely to be a glut in the medium term.

However our columnist Matein Khalid thinks the Trump administration will force countries such as Japan, South Korea, Taiwan and India – which have long-term supply contracts with Qatar and other GCC gas exporters – to offset trade surpluses with the US by scaling up purchases of American LNG.  We shall see.

There is nothing earth-shattering in The New Joule Order but it is well worth reading. The emphasis on US exceptionalism, the abundance of natural resources in the North American continent and the confidence that imparts are unmistakable in the text.

For the rest of us, these are uncertain times.