Energy CEOs see 'demand decade' as AI and growth power consumption

Baker Hughes CEO Lorenzo Simonelli declared a “demand decade” ahead for energy at the ADIPEC conference in Abu Dhabi, pointing to AI, population growth, and developing nations as forces driving consumption, CNBC reported.

“We’re looking at very much seeing capital investments improve and increase over time,” Simonelli told CNBC, as growing consumption requires additional infrastructure. Industry activity is expected to rise by a low-single-digit percentage in 2027.

The optimism is not universal. Executives from RWE and BP highlighted geopolitical risks, rising costs, and uncertain oil prices as complications that could slow investment. The tension between rising demand and a challenging investment environment is the defining feature of the energy outlook for the coming decade.

The demand drivers

The demand case rests on three pillars. AI data centers are driving unprecedented growth in electricity consumption. Population growth in developing nations is lifting energy demand as incomes rise and living standards improve. And the electrification of transportation, heating, and industry is shifting energy demand from direct fossil fuel use to electricity, which must be generated.

AI is the newest and most visible driver. The buildout of large language models and the inference workloads that follow require massive computing capacity, which requires massive power. Data centers that once drew tens of megawatts now draw hundreds, and the pipeline of planned facilities suggests the trend is accelerating. The electricity demand from AI could exceed the current consumption of some small countries within a few years.

Simonelli framed the implication: “If you look at the energy system, though, what it really means is it’s going to have to be more resilient. That means more storage. It means more pipelines. It means eliminating choke points that exist today.” The Middle East conflict has highlighted the need for alternative supply routes and spare capacity, making resilience a strategic priority.

The investment challenge

Markus Krebber, CEO of German energy company RWE, captured the tension. “You have huge investment opportunity, but on the other hand, a very challenging investment environment,” he said. AI and electrification are driving demand, but geopolitical tensions, supply chain pressures, and higher interest rates are raising the cost and risk of investment.

The interest rate point is important. Energy projects are capital-intensive and long-lived, with payback periods measured in decades. Higher interest rates raise the hurdle rate for new projects, making it harder to justify investment even when demand is growing. A project that made sense at 2% interest rates may not make sense at 5%, and the rates have been at the higher level for over a year.

Krebber was skeptical about the speed of the buildout. On planned expansions in computing capacity and the power needed to support them, he said “it’s going to come, but it probably comes slow.” The slow pace reflects permitting delays, supply chain constraints, and the time required to build transmission infrastructure. Data centers can be built in 18 months, but the power plants and transmission lines they need take years.

The price uncertainty

BP CEO Meg O’Neill highlighted the uncertainty surrounding oil prices, saying “we need to plan our business for a lower-price environment.” The comment is striking because BP is one of the world’s largest oil producers, and planning for lower prices means investing less in new production.

The price uncertainty has two sources. The Iran war has disrupted Middle East supply, keeping prices elevated. If the war de-escalates, supply could normalize and prices could fall sharply. Richard Bronze, co-founder of energy consultancy Energy Aspects, said oil markets could face oversupply in 2027 and 2028 if Middle Eastern flows return to normal.

The second source is the energy transition. The shift toward renewables and electrification could reduce oil demand over time, which would put downward pressure on prices. Oil companies are caught between the near-term demand from AI and population growth and the long-term demand destruction from the transition. Planning for a lower-price environment is a hedge against the transition risk.

The Middle East context

The ADIPEC conference in Abu Dhabi is the backdrop for these discussions, and the location is not incidental. The United Arab Emirates has pledged to strengthen its energy infrastructure, saying the Middle East war demonstrated the value of investing in alternative supply routes and spare capacity.

Schneider Electric CEO Olivier Blum noted that some projects in the Persian Gulf have slowed because of the conflict. “In the mid-term, I would say the opportunity for more infrastructure has even increased,” he told CNBC. The conflict has delayed near-term projects but increased the long-term case for investment in resilience.

The Middle East remains the swing producer for global oil, and the war has demonstrated that reliance on the region carries risk. The investment in alternative supply routes and spare capacity is an insurance policy against future disruptions. The cost of that insurance is higher investment, which supports the “demand decade” thesis even as it complicates the economics.

What I think

The “demand decade” framing is correct but incomplete. Demand is rising, driven by AI and electrification, and the industry will invest to meet it. But the investment environment is harder than it was a decade ago. Higher interest rates, geopolitical risk, and the energy transition all raise the cost and uncertainty of new projects. The decade will see more demand and more investment, but the investment will be more selective and more risk-averse than the demand case implies.

AI is the demand driver that is least understood. The electricity consumption of data centers is growing exponentially, and the power infrastructure to support it is not being built fast enough. The gap between demand and supply for data center power is the most concrete expression of the “demand decade” thesis. Something has to give, and what will give is either the pace of data center construction or the pace of power plant and transmission buildout. The latter is more likely, which means more energy investment.

The price uncertainty is the thing that could derail the investment thesis. If the Iran war de-escalates and Middle East supply normalizes, oil prices could fall below the level that justifies new investment. The oversupply that Energy Aspects projects for 2027 and 2028 would hit the industry just as the investment cycle is ramping up. Companies that invest at the top of the cycle will struggle if prices fall.

The BP approach of planning for a lower-price environment is the prudent one. Demand is rising, but prices are not guaranteed to follow. The companies that survive the demand decade will be the ones that invest selectively, maintain balance sheet strength, and avoid betting the company on a single price scenario. Simonelli’s optimism is justified, but it is the optimism of an equipment supplier who benefits from investment regardless of the price. The producers face a harder calculus.