- U.S. electricity demand is projected to hit new records in 2026–27, led by data centers/AI and broad residential, commercial, and industrial growth.
- The generation mix continues shifting toward renewables (~28% by 2027) as coal declines and natural gas slightly loses share.
- 2025 tariffs on metals and inputs have lifted oil-and-gas costs 4%–40%, putting more than $50B of upstream/offshore projects at risk of delay.
- Global energy demand is accelerating while efficiency gains are slowing, raising reliability and emissions stakes without faster clean supply and grid buildout.
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US Power Demand and Generation Mix: The U.S. is entering a phase of elevated electricity demand, driven by residential, commercial, and industrial sectors, especially the growing pull from data centers and AI infrastructure. Demand is expected to rise to ~4,256 billion kWh in 2026 and ~4,364 billion kWh in 2027, surpassing prior records. Simultaneously, the fuel mix is shifting: natural gas power generation will hold slightly less share, coal will decline, and renewables will increase to about 28% by 2027, indicating a structural transition in the power supply portfolio.
Impact of Tariffs on Upstream Oil & Gas Projects: U.S. tariffs on metals (steel, copper, aluminum) and certain feedstocks have escalated material and service costs by 4%–40%. These cost pressures—combined with supply chain disruptions—threaten to delay final investment decisions for projects worth over $50 billion in oil and gas, particularly offshore and greenfield initiatives.
Global Demand & Efficiency Trends: Globally, energy demand increased 2.2% in 2024, outpacing the trend of the previous decade. Electricity demand grew 4.3%, powering the majority of energy demand growth; but energy intensity improvements weakened to around 1% annual improvement—well below long‐term averages. These dynamics suggest that while the world is electrifying faster, efficiency gains aren’t keeping pace, posing emissions risk unless mitigated by clean energy sourcing.
Strategic Implications: Energy companies and utilities will need to prioritize resilient supply chains, capex discipline, and hedging against input cost volatility. Renewable investments are vital but must be matched by enhanced grid capacity and storage to manage growing peak loads. Policy and regulatory stability will be key; misaligned incentives (e.g., between cost and emissions in tariffs or electricity pricing) could derail decarbonization efforts.
Open Questions: Will renewables and storage deployment be fast enough to serve the surging demand while ensuring reliability? How will international trade policy evolve to mitigate destabilizing tariffs or supply disruptions? Can energy intensity improvement be accelerated through tech or policy interventions?
Supporting Notes
- The EIA forecasts U.S. electricity consumption will rise from 4,198 billion kWh in 2025 to 4,256 billion kWh in 2026 and 4,364 billion kWh in 2027. Residential, commercial, and industrial sectors each approaching or exceeding previous highs.
- Projected generation fuel mix shift: natural gas share down to ~39% in 2026–27, coal falls to ~15%, renewables climb from ~24% to 28%, nuclear holds near 18–19%.
- Tariff‐induced cost increases: materials and services for oil and gas operations up by 4% to 40%; over $50 billion of projects may experience delays.
- Global energy demand increased 2.2% in 2024 with electricity demand growing 4.3%; energy intensity improved only ~1%—substantially slower than pre‐2020 averages of ~2% or more.