Energy Musings - December 9, 2025
The global shipping industry faces challenges from the energy transition. Which fuels will power ships, how many ships will be needed, where will they be built, and who will build and man them?
Last Thursday, we were on a panel at the International Workboat Show & Underwater Intervention 2025 conference in New Orleans to discuss the global shipping industry’s challenges posed by the energy transition.
Along with me on the panel was Sean Kline, the President and CEO of the Chamber of Shipping of America. Eric Smith, the Associate Director of the Tulane Energy Institute, moderated the panel.
Here is my complete text and accompanying slides. We shortened our prepared comments to ensure adequate time for questions and discussion of this critical topic.
Good afternoon, and thanks for coming.
We’re here to talk about the energy transition and its impact on global shipping.
Why is it important?
Because energy is the lifeblood of the economy and determines our living standards. Remember, 80% of the world’s trade travels on ships. Without sufficient ships, we will face a more challenging world.
We are in an energy transition, according to the International Energy Agency and climate activists.
Since it will impact every business and every person, we need to ask: In what ways? How quickly? And will some industries be more affected than others?
Answering those questions first requires dissecting the issue of an energy transition.
According to Vaclav Smil, the Canadian energy analysis guru, “there is no formal or generally accepted hierarchy of meanings” for energy transition.
He says the most often used definition is “the change in the composition (structure) of primary energy supply.” In other words, the shift from one specific energy-supply pattern to another. Today, it means transitioning from fossil fuels to renewable energy.
In his many books on energy and energy systems, Smil repeatedly notes that energy transitions are slow. They take years, decades, and even centuries to occur because the shift depends on the physics of energy, the fuels involved, and the willingness and ability to adopt new fuels.
We are in an energy transition, but it has been underway for centuries. Initially, we relied on manpower, then animal power, and eventually on energy captured from water and wind. Then we developed engines and motors powered by fossil fuels, which revolutionized our economies and lifestyles.
Now we are being asked to power everything by electricity generated by renewable power.
Abandoning fossil fuels with their carbon emissions, we are told, will keep the world from becoming uninhabitable due to rising temperatures. But what are the trade-offs?
Before delving into the implications of the energy transition, we need to acknowledge that the shift will impact all industries – not just those that provide energy and transport energy fuels, but also those that support our everyday lives. Shipping is at the top of the list.
At one level, the question of whether the shipping industry is ready for the energy transition asks if vessel owners are prepared to change how they power their vessels.
I know Sean will be getting into this topic in greater depth. But briefly, we should understand the evolution of shipping fuel use and its current state.
Some 5,000 years ago, Egyptians began using sails to help move their dhows on the Nile. Sails grew larger, as did the ships. Therefore, vessels could travel further and carry larger cargoes. But trade remained limited.
Larger ships needed to explore the four corners of the world and expand trade routes required multiple masts and sails. But it wasn’t until the steam engine arrived that shipping was truly transformed from one totally dependent on Mother Nature to one that could adhere to timetables. Ships became more efficient. The Age of Shipping was born, and we have benefited ever since.
We progressed from wood- and coal-powered steam engines to oil-, natural gas-, and nuclear-fueled engines. We are now using batteries, biofuels, and hydrogen. Each fuel offers advantages and disadvantages.
As health and climate issues arose in the final decades of the last century, ship fuels became a target.
The International Maritime Organization secured a mandate to reduce the sulfur content of bunker fuel from 3.5% to 0.5% in geographic regions outside the various low-sulfur coastal zones, where sulfur content was already limited to 0.1%.
Sulfur oxide emissions were reduced by 70%, from over 10 million tons per year in 2018 to 3 million tons per year after the implementation of IMO2020. That implementation is estimated to have cut global sulfur emissions by 10%.
The downside to IMO2020 has been an increase in sea surface temperatures, contributing to a hotter planet. In other words, sulfur oxide emissions were keeping the planet cooler.
IMO is now struggling to secure the adoption of a global carbon tax on ship emissions in furtherance of its efforts to reduce global warming. Lacking the support of key players, this effort is struggling.
Let me briefly return to the issue of the global energy transition. While we are investing billions in building solar and wind farms and adding batteries to cover times when Mother Nature fails to deliver power, global consumption of hydrocarbons continues to rise. In fact, hydrocarbons have produced more primary energy each year than has been generated from the growing renewable energy sources.
Instead of being in an energy transition, where renewable energy supplants fossil fuels, we are in an era of energy addition, in which all fuels are needed to meet global needs.
This should not be surprising, as energy is closely coordinated with economic growth. The growth of the world’s population and the desire of the billions of people living in energy poverty to enjoy the fruits of energy prosperity are driving up energy consumption across all types.
As the UN’s COP30 conference opened last month in Belém, Brazil, in the heart of the Amazon, the International Energy Agency released its latest World Energy Outlook. After six years without its Committed Policies Scenario, which is based on existing government climate policies, the IEA reintroduced it. The CPS calls for global oil consumption to rise from 100 million barrels a day this year to 113 million barrels a day in 2050. It also foresees higher natural gas consumption. Only coal use is predicted to be lower in 2050. Renewable energy does grow significantly, but not enough to supplant fossil fuels.
The IEA’s infamous peak oil predictions died from a bout with reality. The agency’s fossil fuel forecasts have been consistently wrong because it assumed the world would embrace renewable energy to the exclusion of reliable, affordable fossil-fuel power.
The IEA maintains its Net Zero emissions scenario. But they are acknowledging the issues they brushed aside in earlier outlooks and studies, such as those about critical minerals, including rare-earth minerals.
The Net Zero and other future energy scenarios that call for faster acceptance of renewable energy show that the global shipping industry is unprepared for the new energy future.
Earlier this year, my research paper on shipping’s challenges in light of these energy transition projections was published by the National Center for Energy Analytics.
Very briefly, the IEA projects a four- to six-fold increase in the volumes of critical minerals required for the renewable energy transition it foresees. Individual metals face soaring demand projections.
That is because all renewable energy equipment needed for Net Zero requires energy and critical minerals for its manufacture.
While forecasting a massive increase in critical mineral volumes, the IEA dismissed the potential shortage of ships. They said that the world would need fewer tankers and gas carriers, as the volumes of these fuels would decline sharply.
As the people in this room know, we don’t move tons of mineral ores in oil tankers or LNG carriers. We need bulk ships for that mission, and their orders are at a decade-low level.
Additionally, the IEA brushed aside the national security reality posed by China’s stranglehold on the world’s critical minerals industry, including mining and refining.
While the U.S. produces tons of critical minerals, extracting the rare-earth minerals requires shipping the ore to China for processing, which risks supply chain disruptions.
As the world worries about being held captive by China for critical minerals, nations must explore and develop new mines elsewhere. These new mines will take time, as we know that developing them from discovery to production can take 10 to 25 years.
Some of these new mines may be in countries lacking shipping infrastructure, further complicating the challenge of mineral diversification. Besides new shipping routes, the volumes coming from the new mines may require potentially different ship classes. That is another uncertainty that will weigh on shipowners’ investment decisions, not to mention the question of how these new ships will be powered.
As the world embarks on a new mining era, the global shipping fleet will require continued refreshment as world trade grows.
Remember, 80% of the world’s trade is carried by ships, and energy fuels account for 40% of global tonnage. If we add critical minerals, energy accounts for two-thirds of all tonnage shipped today, before the projected new volumes of critical minerals are taken into account.
A 2020 report from Clarkson’s for the global shipping fleet out to 2050 used three world trade-growth scenarios, along with a refresh of the existing fleet. Their top two forecasts called for annual increases in trade volume of roughly 2% and 3%. Given the more recent growth projections for energy and mineral volumes, these estimates may be conservative.
Meeting both energy transition and economic growth demands will require a larger global fleet. That means more shipbuilding capacity. Since 2010, global shipbuilding capacity has fallen by 40%. Therefore, to meet future shipping industry needs, we may need to expand current shipyard capacity by up to 140%.
Compounding the challenge is that shipbuilding is highly concentrated, with China, Korea, and Japan accounting for 85% of total theoretical industry capacity. The U.S. is a near-nonplayer in the global shipbuilding industry.
Building new shipyards, increasing the operating efficiency of existing ones, and growing skilled workforces to construct and operate ships are monumental challenges facing maritime nations and the shipping industry.
These challenges are particularly acute for the United States, a vulnerability that is finally being recognized.
While national security issues are currently driving the effort to revitalize our maritime industry, we cannot ignore the other energy transition challenges facing our shipping industry.