Global energy markets suffered their most dramatic annual decline since the coronavirus pandemic, with oil prices tumbling nearly 20% during 2025. The industry now faces an unprecedented challenge: three consecutive years of falling prices, a pattern that has never occurred in modern times and threatens producer revenues worldwide.
The price collapse has unfolded despite substantial geopolitical tensions across several major oil-producing regions. Analysts attribute the decline to severe market oversupply, describing conditions as cartoonishly imbalanced. Producers continue pumping far more crude than global economic activity requires, creating a persistent glut that overwhelms traditional market mechanisms.
Prices dropped below $60 per barrel last month for the first time in almost five years as diplomatic efforts advanced toward a Russia-Ukraine peace settlement. Markets fear that removing western sanctions on Russian energy exports would inject massive additional supplies into an already saturated market, potentially accelerating the downward price spiral.
The year ended with Brent crude at $60.85 per barrel, down steeply from nearly $74 twelve months prior. U.S. oil prices followed the same trajectory, declining 20% to $57.42. OPEC cartel members normally manage production levels strategically to maintain prices high enough for robust revenues while avoiding levels that push consumers toward low-carbon alternatives like electric vehicles. However, this approach has failed against current oversupply conditions.
Economic weakness in major markets and trade war impacts have significantly reduced demand from China, the world’s largest energy consumer. International forecasts indicate supplies will exceed demand by about 3.8 million barrels daily this year, even after OPEC deferred production increases. Major banks predict further declines ahead, with some projecting prices could reach $55 per barrel by spring or fall into the $50s throughout 2026. Lower fuel prices could benefit struggling families and help cool inflation, though regulators have announced slight increases to household energy bills despite the crude price crash.