Trading cases Tariff scenarios for taxing times

Oil

In the trade truce scenario, global oil demand continues to grow steadily, boosted by stronger economic growth. Demand increases by 4.4 million barrels per day (b/d) from 2024 to 108 million b/d in 2030, broadly in line with our pre-tariff base case.

Meanwhile, global liquids production capacity rises 7.5 million b/d to 116.9 million b/d in 2030. OPEC accounts for most of the increase, with natural gas liquids a key driver of growth. Prices in the low-to-mid US$70/bbl annual average range in real terms support US Lower 48 production as a core driver of non-OPEC growth. By 2030, Brent is projected to average US$74/bbl.

In this scenario, currently low refining margins are the sectoral trough. With oil demand growth outpacing capacity additions beyond H2 2026, refining margins recover before plateauing in the late 2020s. The global composite gross refining margin reaches almost US$10/bbl in 2030, up almost US$4/bbl from 2025 levels.

In the trade tensions scenario, the pace of oil demand growth is slower, but not dramatically so. Global demand still rises by 3.5 million b/d by 2030, almost 1 million b/d less than in the trade truce scenario. Slower demand growth means lower prices: Brent averages US$68/bbl in 2030 in real terms, US$6/bbl less than in the trade truce scenario.

Lower prices curtail drilling and completion activity in the US Lower 48, reducing a key source of non-OPEC supply growth. 

Global refinery utilisation still improves in this scenario, but at a slower pace, with 2026 likely to be the low point in refining margins. From 2026, global composite gross refining margins recover more slowly, increasing from 2025 levels by only US$3/bbl.

The trade war scenario is the most economically destructive, cutting oil demand growth sharply. A world recession leads to an outright fall in global oil consumption in 2026. Demand growth resumes from 2027, but overall demand by 2030 is still 2.5 million b/d lower than under the trade truce scenario.

Weaker demand leads to a plunge in prices as supply significantly surpasses global demand. We project Brent crude to average US$50/bbl in 2026, recovering somewhat after 2026 as the price shock helps stabilise the supply and demand balance. Oil prices are still expected to be weak by the end of the decade in this scenario, with Brent projected to average US$63/bbl in real terms in 2030. That is US$11/bbl lower than under the trade truce scenario. 

Oil at US$50/bbl is a gamechanger. Wood Mackenzie analysis shows that the economics of Lower 48 drilling won’t support production growth with crude at US$50/bbl, despite corporate ambitions to keep pushing down breakevens. In the trade war scenario, we would expect a reduction in investment, leading to lower US oil production through to 2030. Supply growth outside the US would also be affected by low proces due to reduced budgets for upstream projects, with delays expected in projects not yet under development.

A significant fall in oil demand in 2026 results in the global composite gross refining margins collapsing to breakeven levels. Global refining margins remain broadly flat at US$1 to US$2/bbl below current levels until the end of this decade, creating pressure for the rationalisation of weaker sites, particularly in Europe.

Gas and LNG

Under the trade truce scenario, with trade barriers returning to 2024 levels, the global LNG market remains tight in 2025, despite weak Asian LNG demand. Europe needs to rebuild storage after a cold winter, while facing the loss of further Russian supply following the end of the Ukraine transit agreement. But the anticipated oversupply emerging from 2027 remains inevitable, even if tariffs are removed. With a major expansion of LNG supply already under construction and more supply expected to reach final investment decision (FID) in the coming years, LNG supply is set to increase by , more than 40% higher than current levels. Asian LNG demand will enter a new phase of growth, increasing by 120 Mt by 2030, but Europe will need to absorb more LNG than required, pushing average prices down from US$11.2/mmbtu in 2024 to around US$7.2/mmbtu by 2030.

In the US, however, upward pressure on prices increases from a combination of LNG export growth and increased power demand from data centres. Henry Hub prices increase above US$4.5/mmbtu by 2030 from US$2.4/mmbtu in 2024.

The trade tensions scenario has a more modest impact on LNG than on oil. Weaker trade flows and economic growth slows gas demand growth in Asia compared with the trade truce scenario, accelerating the rebalancing of the global LNG market at lower prices.

We would not expect these effects to be very large, given inelastic heating demand and continued growth in industrial production. We project gas demand to be about 10 bcm (7.2 Mt) per year lower across Europe and Asia than under the trade truce scenario. This results in modestly weaker LNG prices, reaching US$6.9/mmbtu by 2030. In the US, the trade tensions scenario does little to derail LNG growth, keeping Henry Hub prices high.

The trade war scenario hits LNG demand hard amid greater market oversupply. Chinese LNG demand falls sharply, while tariffs force buyers to redirect US LNG cargoes. Sluggish demand in Asia means more excess LNG supply is absorbed in Europe, where economic stagnation limits gas use. Prices could drop close to US$7.5/mmbtu by 2027.

In the US, LNG exporters face a squeeze on margins. US gas prices remain resilient in this scenario, despite a downturn in the economy, as falling oil prices reduce US associated gas production, requiring the production of additional higher-breakeven dry gas. US LNG offtakers are likely to cancel some cargoes, as the margins to global prices shrink.

The period of severe global oversupply of LNG could be prolonged beyond 2030 if momentum behind project FIDs persists into 2026. China has signed 17 mmtpa of firm contracts with US LNG projects, but high retaliatory tariffs would shut that gas out of the Chinese market.

Power

The impact of the three scenarios on electricity demand is uncertain. Slower economic growth under the trade tensions and trade war scenarios puts downward pressure on electricity consumption in many countries. However, other factors are continuing to boost demand, such as new data centres, policies to reshore manufacturing production, and goals for economic development, national security and emissions reduction.

Under the trade tensions and trade war scenarios, the added costs and uncertainty created by the tariffs build barriers to investment and make it more difficult to increase supply. In the US, a manufacturing renaissance has been under way, driven by policy support for industries including semiconductors and low-carbon energy. Tariffs on components and raw materials generate uncertainty over the potential to reshore more manufacturing, given the limited domestic supply of those inputs for many sectors.

In a business with a 5- to 10-year planning cycle, not knowing what a project will cost next year or the year after is extraordinarily disruptive. Anecdotally, many companies have been reporting adjustments to strategy and business plans, including deferrals of investments.

Under the trade war scenario, US battery storage is hardest hit among the generation technologies, as China dominates the supply chain. Renewables are generally more affected by tariff-driven cost increases than conventional technologies. However, the ability of new gas-fired projects to capture market share is constrained by rising costs and limited near-term manufacturing capacity growth.

In all scenarios, we expect development activity to slow until there is more clarity on tariff policies. Projects under construction and scheduled for completion in the will be minimally impacted due to significant inventory build-up.

In the trade tensions and trade war scenarios, tariffs will drive increases in the cost of electricity. Rising costs will put upward pressure on prices in power purchase agreements. Attempts at renegotiation or outright termination of existing contracts are likely.

The affordability of electricity gets even more scrutiny than today. In the trade war scenario, there may be an entire reset of utility investment plans through lengthy regulatory processes.

Demand growth depends on two factors – the willingness of customers to pay increasing premiums for power and infrastructure, and the ability of utilities and developers to overcome constraints.

The significant cost premium for building new renewables capacity in the US compared with other countries continues to grow as the US is. The US may also be stuck with older technologies, especially when it comes to solar panels, as the rest of the world advances at a quicker pace.

Metals and mining

In the trade truce scenario, the principal impacts of tariffs are on steel and aluminium, caught in the crossfire of US sections 232 and 301. Copper remains under review by the administration, but like all other metals, it has been exempted from US import tariffs. If this holds, the effect on most metals will be muted, with metals-intensive manufacturing activity remaining relatively robust.

In the trade tensions scenario, lower economic growth starts to weigh on metals demand from the manufacturing sector. With an effective 10% tariff rate, annual copper and aluminium demand falls by 300 kt and 1.5 Mt, respectively, compared with the trade truce scenario.

The trade war . Aluminium demand falls almost 4 Mt in 2026, with copper down 1.2 Mt, compared with our trade truce scenario. Steel demand drops by a projected 90 Mt and lithium demand by 70 kt. All projected growth through 2026 under our trade truce scenario is wiped out in a tariff war.

China’s manufacturing export sector feels some of the worst direct impacts. Exports to markets other than the US help soften the blow, but weaker global demand for Chinese exports hammers manufacturing margins. Chinese exports flooding the global market may prove damaging for competitors, including Japan and South Korea.

After 2026, recovering industrial production improves metals demand growth. There is permanent scarring, however, with demand losses still not fully recovered by 2030. This has implications for metals supply into energy transition sectors. Concerns about under-investment in mining for low-carbon technology metals subside in the near term, but are likely to be short lived. A lower price environment encourages companies to delay bringing additional supply into production as investors sit tight. Looming supply gaps soon open again after 2030, as the mining pipeline dries up and the capital investment rates required to meet demand decline.