Big Themes for 2026: Up and To The Right

Navigating The Energy Macro

Welcome to 2026! We hope everyone enjoyed some holiday season time off with friends and family. We had a great break and are excited to get back to discussing the most important sector in the world: Energy. We kick off the year highlighting the Big Themes we expect to dominate the year ahead.

Our multi-year mega themes are unchanged:

• Everyone on Earth deserve to be energy rich.

• Power Surge!

• AI & energy convergence.

2026-specific themes:

• Deaths that have been greatly exaggerated: (1) China; (2) Coal: (3) Oil demand growth; (4) Renewables and EV growth.

• 2025 narratives that should fade away: (1) Oil glut; (2) Substitution phase.

• Geopolitics & geopolitical competition: (1) China manufacturing glut; (2) European industrial competitiveness; (3) Middle East rising.

• Markets, technology, and M&A: (1) Energy scenario normalization progress: (2) Opportunities within specific energy sources and technologies; (3) Thoughts on corporate strategy and M&A.

• The environment: (1) European CBAM; (2) US coal > China/India/EM coal; (3) Other topic areas.

After recapping our 2025 Big Themes and Tactical Trades posts from the start of 2025 in our last two Super-Spiked posts just prior to the holiday break (here and here), we decided to modify our approach to the current year. We have included both the major and sub-themes in this post and then will follow up with something more akin to a “specific predictions for 2026” post.

Mega Themes

The core mega themes we have been highlighting remain on-track:

• Everyone on Earth deserves to be energy rich. So long as the Other 7 Billion People on Earth are using only a fraction of the energy The Lucky 1 Billion of Us take for granted, we see up and to the right demand for essentially all energy sources and technologies. When unmet energy needs are as massive as they are, there is no need to engage in divisive debates that declare “ABC” technology as The Winner^TM over “XYZ” alternative technology. Growth in specific energy sources and technologies is driven by each country’s natural hierarchy of energy needs.

• Power Surge! We believe 2026 will mark year 4 of what is likely to be at least a decade long power super-cycle. While “AI” (artificial intelligence) gets most of the headlines, general economic growth, improving developing world living standards, trade and manufacturing competition, robotics, space, military, autonomous driving, and aging grids in many places are all critical drivers of the power super-cycle. The world needs more of all forms of power.

• AI & energy convergence. There has arguably been no better development for the health of energy market conservations and policy making than the recognition by leading technology and industrial companies that they need to be part of the process if their own businesses are to thrive. We look forward to the growing engagement from leading technology and industrial companies on energy market, policy, and technology debates.

2026 Theme #1: Deaths that have been greatly exaggerated

China

The combination of Deep Seek, analyzing China’s overwhelming power market advantage, seeing its sizable crude oil strategic petroleum reserve (SPR) builds, and observing how it countered Trump Administration tariff actions in 2025 has woken us up from mindlessly accepting western world “peak China” narratives. We expect China to consume growing quantities of all forms of energy for the foreseeable future. This contrasts with the more pessimistic view that China was either in plateau if not decline and that the country had entered a period of substitution of certain energy sources or technology (e.g., EVs and renewables) in place of others (oil and coal). To be clear, we are in the camp of China energy demand grinding higher and are not anticipating a return to 2004-2014 growth rates. But a positively sloping demand line is constructive for energy commodities versus a flat-to-down trajectory.

Coal

The worst assumption in nearly every energy outlook we have seen—net zero or otherwise—is the view that coal demand is about to completely fall off a cliff as China substitutes primarily renewables and, to a lesser degree natural gas and nuclear, for its domestic coal consumption. The bearish coal view also appears to presume a lack of meaningful coal demand growth in other developing markets such as India, other parts of Asia, and Africa.

With manufacturing competitiveness, AI, and power dominant secular themes, we expect global coal demand to at a bare minimum grind higher for at least the next decade (Exhibit 1). We doubt China will look to quietly give up its significant power and manufacturing dominance to either developed or developing market competitors. Coal is a core underpinning of China’s manufacturing strength. India and other developing countries we also expect to use growing quantities of coal to underpin economic growth.

Exhibit 1: Coal demand has had previous false plateaus only to make new highs driven by economic growth

Source: Energy Institute, Veriten.

Oil demand growth

We are old enough to remember the COVID era calls by some that global oil demand would not recover even back to 2019 levels—that it had already permanently peaked! Within short order, the “peak oil demand” calls shifted to 2025, then 2026-2028, then 2030, and most recently to “the 2030s as a long plateau.” We stand by our long held view—arguably one of our top calls since starting Super-Spiked in November 2021—that no one has any idea in what decade let alone year oil demand will permanently peak so long as the other 7 billion people on Earth are using only a fraction of the energy The Lucky 1 Billion of Us take for granted. We will perhaps save it for our “2026 predictions” post, but 2026 may well be the year this will stop being a high profile debate point for most commentators.

Renewables and EV growth

An irony of the oil demand growth point is that it does not refute the reality of significant global renewables and electric vehicle (EV) growth. Just because US auto OEMs had large (and completely unsurprising) write-offs of their mis-guided EV strategies should not be confused for a lack of Chinese EV export penetration to a large number of countries in southeast Asia, Africa, and Latin America. In fact one of the drivers of our China’s-death-has-been-greatly-exaggerated point is its dominant position in areas like renewables and EV exports. Moreover, just because the Trump Administration has been openly hostile to renewables (especially offshore wind) does not mean its growth has been halted in the United States let alone the rest of the world. Our Everyone On Earth Deserves to be Energy Rich mega theme has a place for all forms of energy sources and technologies. We in fact see a virtuous cycle of inexpensive renewables and EV growth in the developing world driving GDP improvement that helps all other forms of energy as well.

2026 Theme #2: 2025 narratives that should fade away

Oil glut

One way or the other, we believe we are in the final months of the increasingly boring debate as to whether we already are or will soon be in an “oil glut.” We will do a standalone post on oil markets at some point here in the new year.

The short version is most public forecasts that are calling for 2-4 million b/d of liquids (crude oil + NGLs + biofuels) oversupply in 2026 are almost overwhelmingly not matched with appropriately bearish corresponding oil price forecasts. Calling for 2 million b/d of oversupply but then forecasting crude oil prices in the mid-$50s/bbl seems wildly inconsistent. If you believe in massive oversupply (which we define as at least 2 million b/d of liquids oversupply over the course of 2026), most of you are not bearish enough on oil prices.

Our own view calls for merely modest—i.e., NOT an oil glut—oversupply of 0.5-1.0 million b/d for crude oil (i.e., excluding NGLs and biofuels) in 1Q and 2Q 2026, which we think is in fact consistent with a mid-$50s to low $60s/bbl current WTI oil price. We have characterized the period between 4Q2025 and 2Q2026 as the “bottoming phase” for crude oil with the return of a stronger upcycle by 2H2026 or 2027 latest. Our constructive medium-to-longer-term crude oil view is predicated on improving global GDP growth and maturing non-OPEC supply. The recent developments in Venezuela does not change this call.

Substitution phase: Declaring “ABC” technology is The Winner^TM at the expense of “XYZ” competitor technology

Examples here include but are not limited to the following declarations made far too often by political partisans, special interests, or activists (from all sides/perspectives): (1) solar + batteries will dominate over natural gas; (2) natural gas is superior to renewables; (3) natural gas is superior to coal; (4) renewables are superior to coal and natural gas; (5) nuclear is The Answer; (6) SMRs are The Answer over light-water reactors; (7) EVs are better than ICE vehicles, etc. We think you get the point.

As always, we believe every country will pursue the mixture of energy sources and technologies that will best meet its own energy hierarchy of needs in terms of availability and reliability first and foremost followed by affordability (Exhibit 2). Geopolitical security is an overlay at the country level to ensure availability, reliability, and affordability are met. After satisfying those basic needs—and ideally, but not necessarily, simultaneously—countries will take into account environmental considerations.

Exhibit 2: Energy’s natural hierarchy of needs

Source: Veriten.

2026 Theme #3: Geopolitics & Geopolitical Competition

China manufacturing glut

China’s power and hence manufacturing sector advantage is overwhelming versus every other country (Exhibit 3). It’s not a close call. My former colleagues at Goldman Sachs—in particular the great Jan Hatzius—have some terrific graphs that illustrate China’s manufacturing cost advantage in a number of areas (Exhibit 4). How the broader world—not just the United States—chooses to engage with this reality we think may well be the top geopolitical question for the decade ahead.

Exhibit 3: China’s power market is massively larger than every other country or region

Source: Energy Institute, Veriten.

Exhibit 4: Goldman Sachs Economics Research estimates of China’s export cost advantage

Source: Goldman Sachs Research.

European industrial competitiveness

The overwhelming bearishness that exists toward the prospects for Europe’s declining industrial base should naturally spark our contrarian instincts to go the other way. Alas, we didn’t include it as an area whose death has been greatly exaggerated (discussed above) or as a value opportunity (discussed below). If we were to pick one area to watch closely that seems especially energy related, it will be the degree to which inexpensive Chinese EV imports are allowed to compete with Germany’s historically dominant auto OEMs.

Middle East rising

Our November 2025 trip to Abu Dhabi, Dubai, Riyadh, and Dhahran highlighted the Middle East as a region that was economically and geopolitically on the rise. EU Big-4 (France, Germany, Italy, United Kingdom) down versus Saudi/UAE up seems like an easy economic and geopolitical pairs trade.

2026 Theme #4: Markets, Technology, and M&A

Energy scenario normalization progress report

• 2025 was a year of considerable progress on energy macro scenario normalization from leading agencies and observers, which moved away from net zero as the centering point to better respecting energy’s natural hierarchy of needs.

• While terms like “delayed transition” and “addition versus substitution phase” suggest that the 2021-2024 “net zero is the primary objective” worldview has not been completely eradicated, we think that battle is over and is no longer relevant to a forward view of energy markets.

• All established energy sources are growing and there exists a virtuous cycle between energy source growth and GDP expansion. For example, African renewables expansion is almost certainly driving improved GDP and oil demand growth. The world needs all forms of energy, obviously.

Opportunities by energy source/technology:

• Momentum opportunity: Power infrastructure. As noted above, we believe we are in year 4 of a power super-cycle. There are significant opportunities across the power value chain, including both traditional and new power sources and technologies including in generation, transmission, and distribution.

• Value opportunity: Oil value chain. The end of the “oil glut” narrative, one way or the other (we are of course in the “it ends with a whimper” camp) suggests medium-to-long-term opportunity exists across the oil value chain. Our runner-up on the value opportunity is domestic coal to help meet rising US power generation—an area we need to do more work before coming to a stronger conclusion that it will play a more meaningful role going forward.

• Super Vol: Global gas markets are entering a phase of accelerating supply and demand growth. Our “Super Vol” oil framework we believe will apply to spot LNG (liquefied natural gas) pricing. Strategies that are low cost-of-supply in nature and can thrive in periods of high volatility we believe will outperform.

• China exporting (dumping?) renewables and EVs in developing countries: positive for global GDP and hence all sources of energy demand. It is a virtuous cycle.

• Nuclear: We need to circle back with better formulated thoughts. No question this is a long-term opportunity and component of healthy energy markets for many countries.

• New technologies: Autonomous driving, robotics, industrial AI applications, grid stability, enhanced geothermal, various environmental and efficiency solutions, to name a few, are among the areas we remain focused on.

Corporate Strategy and M&A

• For the traditional energy upstream sector, we believe “business development” will prove more important than high-profile M&A activity in a world where US shale oil is maturing.

• Global gas: A coming Super Vol environment suggests a growing potential for M&A as winners and losers emerge and markets evolve.

• Oil services: The opportunity in distributed power generation and in some cases the broader power value chain remains front and center.

• For other energy sub-sectors, we will circle back over the course of the year as appropriate.

2026 Theme #5: The Environment

In an effort to better incorporate how our own environmental viewpoints fit into our outlook for energy, we are going to make a conscious effort to shift from simply pushing back on the ideological version of “net zero” that we did not agree with—that battle is over—and instead highlight environmental topics or developments that either jump out to us or we think the world should focus on.

• European CBAM. The January 1, 2026 implementation by the EU of a CBAM (carbon border adjustment mechanism) is arguably one of the most interesting environmental and trade developments that bears watching. We are not going to debate in this post the merits of European climate policy. Rather, what we find intriguing is the idea that if a country holds its companies to tougher rules on the environment or labor, does a border tax sufficiently level the playing field? Let us try to be as clear as possible in this comment: At this time we are not expressing a view that the new CBAM is good or bad for European economic or environmental policy. We simply find it interesting and worthy of our attention and study.

  It has long been our view that it makes little sense for the EU (or US) to have environmental, labor, and trade policies that simply result in the offshoring of its domestic industrial base to countries with weaker environmental and labor standards and where trade policies disfavor the EU (or US). While we are instinctively skeptical that Europe’s new CBAM will do much to reverse European de-industrialization, we will keep an open mind to seeing how this plays out. We welcome the perspectives of those better educated than us on this topic in particular from the perspective of Europe’s industrial competitiveness.

• US coal > China/India/Other EM coal. As coal demand grows in China, India, and other developing nations, we see no reason for why US coal should not play a role in meeting those needs. From an environmental standpoint, we suspect that stricter environmental and labor standards in the United States will yield a net environmental benefit relative to many (all?) developing nations. The argument is similar to the one we make about crude oil and natural gas relative to the “keep it in the ground” movement. For those that believe in “keep it in the ground,” why not start with the rest of the world? As with the CBAM discussion, we welcome perspectives that counter our view that US coal has superior environmental and labor characteristics versus developing market alternatives.

• Water, methane, orphan wells. Water disposal (Permian Basin), methane abatement (global), and orphan wells (US) are among the environmental areas we will be watching in 2026. We also need to ramp up (and better articulate) on the environmental and labor issues in non-US/Canadian areas if we are to effectively argue for maximizing US and Canadian energy exports. For example, how do the water disposal questions in the Permian Basin compare to overall environmental practices in Russia, Iran, or China as examples.

⚡️On A Personal Note: Taking Risk and Putting Past The Hole

I have just returned from the Goldman Sachs Energy Conference in Miami which is always a fantastic way to start the year and holds a special place in my heart. My oldest was born 24 years ago as I was literally walking to a Murphy Oil dinner ahead of the 2002 version of this event (in those days at The Pierre Hotel). Fortunately, and thanks to our then NYC neighbor Karen (whom we had not previously met), my wife and I made it to the hospital in time. That’s a fun story but not the point of this post. Somewhat remarkably, our first ever dog, Kenzie, was also born on January 7^th and just celebrated her 9^th birthday. First child and first dog are two of the greatest life changing evens I’ve experienced, something you can’t imagine until you go through it. But also not the point of this post.

On a Day 2 “Legends of Rock / Where Are They Now” panel that included my former colleagues Jeff Currie and Damian Courvalin, I stressed the need for especially traditional energy companies to be willing to take risk and to be differentiated from peers in strategy and approach. The goal is to win, to outperform the competition including every other stock in the S&P 500 or corresponding SMID-cap or global index. The goal is not to cautiously tweak one’s strategy to be modestly different than peers. The investor world is clearly not looking for more of the same—cyclical realities notwithstanding.

In that spirit, I need to apply to myself what I am preaching to others. So for 2026, my golf philosophy will be to always look to one putt. As an 8-11 handicapper, I have a tendency to leave way too many putts short. To think more about avoiding 3 putts than to go for the 1 putt. If you leave a lot of putts short, you will never have the chance of 1 putting, of winning. It’s a risk averse philosophy. It is settling for mediocrity—hey, 8-11 is not bad compared to 12-19. Nonsense! When you play golf, you are trying to win on that day and every day. Winning is fun. Losing s---ks. As the great Ricky Bobby stated, “if you aren’t winning, you are losing.” It’s a philosophy George Steinbrenner held. It’s a philosophy I need to incorporate into my golf game.

My golf rounds are likely to remain at a lower run rate for the foreseeable future as I think 2026 is going to be a spectacularly exciting year for the broad energy sector—the most important sector in the world. But for the rounds I do get in, I will aim to putt past the hole every time, some of which will roll in.

🎸 On The Production of Super-Spiked

I am often asked how much time it takes to produce Super-Spiked each week. With the correct musical inspiration, it feels effortless, This post was written while listening exclusively to my 2025 Spotify Wrapped playlist (here), which heavily features Nordic melodic death metal bands Ensiferum and Tÿr, both of which I discovered in 2025. Check them out here and here.

⚖️ Disclaimer

I certify that these are my personal, strongly held views at the time of this post. My views are my own and not attributable to any affiliation, past or present. This is not an investment newsletter and there is no financial advice explicitly or implicitly provided here. My views can and will change in the future as warranted by updated analyses and developments. Some of my comments are made in jest for entertainment purposes; I sincerely mean no offense to anyone that takes issue.