Oil's Resilience in a Shifting Landscape: Navigating Demand and Supply Realities in 2025

Goldman Sachs’ recent analysis, corroborated by OPIS data, reveals a nuanced yet compelling picture of oil demand in 2025: despite headwinds from electric vehicle (EV) adoption, high interest rates, and geopolitical tensions, global oil consumption remains stubbornly resilient. The story hinges on divergent regional trends, structural shifts in energy use, and the precarious balancing act between supply discipline and demand elasticity. For investors, the path forward demands a keen eye on emerging markets, refining margins, and the ever-present risk of geopolitical flare-ups.

The Resilience Paradox

Oil demand in 2025 has defied expectations, holding steady near 2024 levels at ~100.5 million barrels per day, driven by two critical factors. First, emerging markets—particularly China—have absorbed geopolitical shocks and trade tensions, with Chinese oil demand hitting a five-month high in early 2025. Beijing’s policy support for export-driven industries and infrastructure projects has fueled this rebound. Second, petrochemicals and air travel continue to underpin demand, even as EVs chip away at transportation fuel consumption.

Growth, but Not Without Constraints

Goldman Sachs forecasts 1.2 million barrels per day (bpd) growth in 2025 demand, down 35% from 2024 projections. The slowdown reflects a stark regional divide:
- Non-OECD nations, led by India (+300,000 bpd), are the primary growth engine, buoyed by ~4% GDP growth and industrialization.
- OECD countries, meanwhile, face contraction (-0.4 million bpd) as EVs capture 28% of new car sales globally, peaking gasoline demand.

Jet fuel demand, however, shows resilience, nearing 98% of pre-pandemic levels, signaling a post-COVID normalization in air travel. Yet the sector’s long-term growth hinges on structural factors: Goldman projects air passenger numbers to double by 2040, though oil intensity per passenger will decline as airlines adopt more fuel-efficient technologies.

The EV Challenge and Its Limits

EV adoption is the single largest threat to oil demand, with sales expected to reduce consumption by ~0.6 million bpd by 2026. But this transition is uneven. High oil prices and tight supply in 2024 accelerated EV uptake, pushing annual sales to 17 million units—up from 11 million in 2024. However, lower oil prices in 2025 ($82/bbl average) could slow this momentum by 3–5%, according to Goldman.

Investors should note that EVs alone cannot yet replace oil’s dominance. Even with aggressive adoption, Goldman estimates that oil will still account for ~60% of global energy demand by 2040, underscoring its enduring role in petrochemicals, shipping, and aviation.

Supply-Side Dynamics: OPEC+, Shale, and Russian Resilience

The supply picture is equally complex. OPEC+ has maintained 3.6 million bpd production cuts through Q3 2025, with Saudi Arabia’s voluntary 1 million bpd cut acting as a swing valve. Yet compliance remains uneven—Angola and Nigeria have resisted cuts—raising risks of internal fractures.

Outside OPEC+, U.S. shale growth has slowed to 500,000 bpd, as producers prioritize returns over output. Meanwhile, Russian crude production has rebounded post-sanctions, with Urals crude trading at a $3–$4 discount to Brent. This highlights a broader truth: non-OPEC supply growth (1.7 million bpd in 2025) is insufficient to offset OPEC+ cuts, keeping markets finely balanced.

Price Volatility and Geopolitical Risks

Goldman’s $82/bbl Brent average for 2025 reflects this balance, with seasonal peaks near $88 in Q4. Yet risks loom large:
- Geopolitical escalation: A Middle East conflict could spike prices to $110/bbl, while a China slowdown might drag them below $70.
- Trade wars: U.S.-China tariffs have already added 18% to Asian refiners’ shipping costs, while sanctions on Iran’s exports could tighten supply if not offset by China’s dominance (90% of Iranian oil imports).

Investment Implications: Navigating the Crosscurrents

For investors, the path forward requires a multi-pronged strategy:
1. Monitor OPEC+ compliance: Track cuts and Saudi Arabia’s output decisions to gauge supply flexibility.
2. Watch refining margins: Stabilizing at $12/bbl, margins will be pressured by IMO 2025 sulfur regulations, which favor low-sulfur fuel oil.
3. Position for volatility: Use options or ETFs (e.g., U.S. Oil Fund (USO)) to hedge against geopolitical surprises.
4. Engage with transition themes: Petrochemicals and midstream infrastructure (e.g., storage and pipelines) offer resilience amid shifting demand.

Conclusion: A Fragile Equilibrium

Goldman Sachs’ analysis paints a picture of oil demand resilience under pressure—supported by emerging markets and structural needs, yet vulnerable to EV adoption, economic slowdowns, and geopolitical shocks. The $70–$85/bbl price range reflects this tension, with upside risks tied to Middle East stability and downside risks to a China slowdown or global recession.

Investors should prioritize agility: allocate to diversified energy portfolios, track OPEC+ compliance metrics, and remain vigilant to geopolitical shifts. The era of oil’s dominance may be ending, but its role as a strategic asset—and a market vulnerable to Black Swan events—remains unchanged. As always, the key lies in balancing cyclical opportunities with structural trends.

Data sources: Goldman Sachs, OPIS, IMF, IEA, and company filings.