Energy Management in Unstable Markets

Balancing geopolitical risks with energy strategy

Following the 2024 electoral super-cycle, with elections in major global countries and regions including the United States, United Kingdom, the European Union and India, there has been a mounting pressure on government leaders to devote attention to energy affordability and security.

Energy has long affected global diplomacy, with countries striving for their share of energy supply. With the energy transition a key priority on agendas worldwide and prices, along with increasing stakeholder pressure, business leaders face unprecedented challenges.

As elections in Canada and Australia loom in 2025, procurement teams must balance the interplay of geopolitical events and policy shifts with the need to build resilient energy strategies that will be risk-managed and forecasted with a high level of cost certainty.

In this article, we share factors to consider when navigating these challenges to help your business make energy decisions.

Geopolitical energy landscape: key changes to watch

Exploiting energy resources to promote national goals is a strategy that major global players have adopted for centuries. In the current political climate, the influence of the US, Russia, China, and the EU is directly impacting the shift to renewables, creating a turbulent environment for the transition to a low-carbon economy. So, what are the key changes you need to watch?

Conflicts in Ukraine and the Middle East – It is no secret that Russia’s full invasion of Ukraine in February 2022 created shock waves in global energy markets, leading to supply shortages, security issues, economic uncertainty and price volatility. Before the invasion, the share of Russian energy in overall EU imports was a massive 42.6% – more than any other country.The weight of Russia’s exploitation is still felt three years later, as oil and natural gas prices continue to increase. Alongside conflicts in the Middle East, these inflationary pressures have fueled voter anxiety over potential supply shortages, particularly in countries that depend on energy imports such as the EU, UK and India. This has caused government leaders to push towards power and gas affordability and security.
Renewable energy transition – With classic oil, gas, and power supply dynamics changing, government leaders across the globe are focusing efforts on increasing energy independence. The key to gaining independence lies largely in the green energy transition; however, voters’ worries have prompted governments to evaluate the cost it will incur in the short term. With pressure mounting to reach climate targets, low-carbon energy sources will come to the fore, but governments must ensure that energy remains affordable in the meantime.In the EU, where the election resulted in the challenging of traditional power structures, the focus is on advancing the Green Deal agenda – but this is limited by economic priorities. Europe’s REPowerEU plan proposes increasing the share of renewables in final energy consumption to 45% by 2030.
Prioritization of low-carbon technologies – To enable the shift to renewable energy sources, low-carbon technologies must be prioritized by governments and implemented in their strongest industries. Heat pumps, carbon capture, solar energy and renewable power are all key in helping to decarbonize heavy industries and should help countries to bolster growth and employment.
USA Energy Policy transition – In the US, the Federal energy agenda is focused on promoting fossil energy and critical materials production and exports. The transition in energy policy could lead to shifts in the balance between fossil fuels and renewable energy sources, potentially impacting supply and pricing of electricity and natural gas. Businesses need to closely monitor policy developments and adjust their sourcing strategies accordingly.
Recently proposed tariffs on natural gas and power markets – Since President Donald Trump took office, the energy war has been escalating. Trump’s recently proposed tariffs could influence the cost of energy imports and exports from Canada and Mexico to the US, potentially impacting domestic prices in North America and supply chains. China has also set retaliatory tariffs, stopping imports of liquefied natural gas from the US.Globally, other countries are taking action to shield customers from the turbulent energy market. The Energy Price Cap set by Ofgem in the UK means that from 1 April to 30 June 2025, there is a maximum amount that energy suppliers can charge businesses for each unit of energy, if they’re on a standard variable tariff.

How to manage price risks during periods of geopolitical uncertainty

Amidst ongoing geopolitical uncertainty, the outlook for global businesses attempting to protect themselves from price risks seems dismal. However, the energy management process can be much smoother with the right support.

Here are five critical aspects to get right in your energy management strategy:

Market intelligence – Businesses need to closely monitor market and policy developments and adjust their sourcing strategies accordingly. With elections in Canada and Australia approaching, it’s important to watch political changes and energy policy implications.
Diversification is key – By diversifying your energy sources and ensuring they are spread across different geographic regions and contract structures; you can lessen your business’ reliance on a single energy provider.
Hedging strategies – Evaluating your hedging strategy is crucial in ensuring a robust energy management system and is dependent on your company’s risk profile. Physical hedging can help you lock in prices and reduce exposure to price volatility – something that is key amidst potential tariffs – whereas financial hedging can help you to offset price risks by taking the opposite position in a related asset.
Long-term agreements vs spot market purchases – Long-term agreements can provide your business with price stability, but they may limit flexibility, whereas spot market purchases offer flexibility but expose you to greater price volatility.
Invest in renewables – With an increasing focus on the energy transition, it could be a good time to consider investing in renewables, nuclear power and LNG infrastructure. Partners like World Fuel can help you research power purchase agreements (PPAs), tax credits, subsidies and grants to support this process.

Have you pressure-tested your current approach?

To help you evaluate your current strategy, consider the following questions:

Does your current strategy allow for flexibility? –A flexible energy procurement strategy is essential to allow your business to adapt to changing market conditions and regulatory landscapes.
Do you have access to real (or near)-time intelligence? – Advanced analytics and forecasting aligned to real-time market updates and regulatory changes, mean you can pivot in an optimal fashion to benefit your business
How strategic is your risk management approach? –Comprehensive energy procurement and supply management allows for more cost certainty in your business’ budgeting and forecasting process.
Regular reviews – Ask yourself if your solution provides the insights you need to navigate geopolitical volatility and manage price risk effectively, or if a more comprehensive solution could help you achieve your goals more efficiently.

Future-proofing your energy management solution

As new policies, tariffs and government tactics are put into play, the year ahead promises to bring change. Businesses should expect to continue navigating cost uncertainty as the price and availability of renewables continue to fluctuate.

It is therefore essential to adopt an energy procurement strategy that enables your business to be flexible. At World Fuel, our expertise in managing power and natural gas price risk and building resilient energy solutions can help you to future proof, adding value with the knowledge you need to navigate market complexities and achieve your energy goals.