This article was published by The Energy Mix on Dec. 1, 2025.
By Mitchell Beer
With fossil fuel publicists touting decades of future demand, and those expectations baked into last week’s pipeline deal between Canada and Alberta, the global oil and gas industry already recognizes and is planning for its own decline, the UK-based Carbon Tracker think tank concludes in a recent review.
“A clear-eyed analysis reveals an oil and gas industry already conducting a quiet, rational, strategic retreat from long-term growth, despite public bravado from its supporters in the stands,” analysts Harry Benham and Guy Prince write in a Nov. 12 blog post.
“The cold data shows a sector preparing for plateau and decline, rewarding investors who push for harvesting with dividends and buybacks, and leaving investors who believe the growth rhetoric dangerously exposed.”
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This “say vs. do” chasm is playing out “in real-time company boardrooms and capital allocation plans,” Carbon Tracker concludes. The post cites four trends that contradict the “political rhetoric of robust future fossil demand”:
• Capital expenditure (“capex”) in the industry still stands at US$500 to $600 billion per year, but that’s about 40% below a peak of nearly $900 billion that now dates back more than a decade. “The industry has rationally concluded that this leaner, more efficient level of investment is sufficient to meet slowing demand and maintain a production plateau,” the blog post states. That makes the industry’s refusal to increase investment a “powerful vote of no confidence” in the notion of endless future growth.
• Spending on exploration for new oil and gas wells has fallen by about 60% in the last decade, and the major, new projects recently reported in Brazil are likely “more ornamental than truly productive and profitable”, with the world unlikely to need the new oil by the time the projects are ready to deliver it in 10 to 15 years.
• Credit agencies like Standard & Poors and Fitch Ratings have downgraded the sector after “listening to the numbers, not the speeches.” Those decisions show analysts “increasingly [treating] major new greenfield fossil fuel projects as potentially stranded from the day they are announced.”
• The continuing news of oil and gas mergers and acquisitions show a different kind of stranding, with bigger corporate players absorbing assets that aren’t meeting their revenue targets. “This is not production growth,” Carbon Tracker writes. “It is financial engineering—shuffling existing assets to cut costs and maintain dividends, and certainly not to expand a resource base.”
While not all companies are pursuing this new strategy, the ones that don’t “are increasingly punished by the market,” the authors state. “But legacy structures and political pressure still lead to capital misallocation at the margins—a key risk for investors to resist.”
Cooking the Books
Carbon Tracker posted its analysis just as the International Energy Agency was releasing its latest World Energy Outlook, long styled by the IEA as the “gold standard of energy modelling”. After months of intense arm-twisting from the Trump administration to cook the books and align its modelling with a “drill, baby, drill” agenda, the IEA resurrected its Current Policies Scenario (CPS) in this year’s WEO. It showed that rising oil and gas demand through 2050.
But that projection was just one of three in the WEO, and amounted to “a triumph of political gesture over foresight,” Benham and Prince state. “The CPS—which assumes no new climate policies at least until 2050—is a backward-looking relic that ignores the seismic shifts already reconfiguring the global energy system.”
That makes the CPS “a warning, not a forecast: it implies energy innovation stops in 2030, as if hitting some sort of intellectual brick wall,” they write. The reality on the ground is that “the pillars of oil demand growth are crumbling in real time, and irrespective of price—something front-line oil industry instinctively knows and can see.”
A Fossil Industry Collapse in Five Acts
Carbon Tracker says the collapse is being driven by these factors:
• Global gasoline demand is set to peak this year as vehicles electrify. “This isn’t a future prediction; it’s a present-day reality as EVs are on track to displace four to five million barrels per day of demand by 2030.”
• China is going through a “stunningly fast transition that undermines the core assumption of endless Asian fossil-demand growth,” with oil demand growth already declining and power sector emissions set to peak this year as renewables push coal below 50% of total generation.
• Growth in demand for petrochemicals and aviation fuels “cannot possibly offset the sweeping declines in road transport and power generation. They are a fleeting respite, not a revolution.”
• Liquefied natural gas (LNG) has drawn too much investment, so that any new expansion will threaten the financial viability of existing projects facing a global glut.
• Investors are voting with their dollars, with annual investment in renewable energy, grids, and electrification hitting $2.2 trillion per year, nmore than double the remaining capital expenditures in oil and gas.
“The market is already building the post-oil energy system, recognizing that fossil fuels, while important, are a diminishing part of a very new and different, larger energy mix,” Carbon Tracker states. And the pattern of the industry’s own investments “recognizes the very transition that industry supporters attempt to dismiss.”
That quiet retreat “is perhaps its most rational act in a decade,” Benham and Prince conclude. “The great irrationality now lies with investors who mistake this harvest for a rebirth, and with policy-makers who resuscitate outdated forecasts. The industry is no longer led by multi-billion-dollar, high-risk engineering megaprojects, but by sober capex reduction, and cash flow diverted into investors’ pockets.”
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