Report on U.S. Energy Sector Transition and its Alignment with Sustainable Development Goals

Executive Summary

An analysis of the latest U.S. Energy Information Administration (EIA) data on refinery utilization reveals a significant structural shift within the energy sector, directly impacting progress toward key United Nations Sustainable Development Goals (SDGs). The reported 93.9% utilization rate, while appearing high, masks regional vulnerabilities and a broader trend of decarbonization. This report examines the data as a leading indicator of the accelerating transition away from fossil fuels and provides strategic recommendations for aligning investment portfolios with SDGs 7, 9, 12, and 13.

Analysis of Refinery Utilization and its Connection to SDG 7: Affordable and Clean Energy

The EIA’s report of a 0.8% weekly and 1.5% year-over-year decline in refinery utilization as of July 11, 2025, signals a fundamental realignment toward cleaner energy sources, a core objective of SDG 7 (Affordable and Clean Energy). The divergence in regional performance, with the East Coast at 59% utilization versus the Gulf Coast at 93.5%, underscores the uneven nature of this transition, which is influenced by aging infrastructure and localized policy changes.

Key Drivers of Sectoral Change

• Infrastructure and Policy Shifts: Planned refinery closures in California and ongoing maintenance challenges reflect a move away from traditional fossil fuel infrastructure, creating opportunities for investment in modern, sustainable alternatives as outlined in SDG 9.
• Global Supply Chain Realignment: Disruptions in global shipping have exposed the fragility of fossil fuel supply chains, reinforcing the need for localized and resilient clean energy systems.
• Evolving Consumption Patterns: A notable shift in consumer behavior, with gasoline expenditures falling to a historic low of 3.2% of disposable income, indicates a move toward more responsible consumption, aligning with SDG 12 (Responsible Consumption and Production). This is further evidenced by the growing adoption of electric vehicles (EVs).

Sector-Specific Implications and SDG Alignment

The energy transition creates distinct challenges and opportunities across various sectors, each with implications for sustainable development.

Legacy Automotive and Refining Sectors

Traditional Internal Combustion Engine (ICE) manufacturers and oil refineries face structural decline. This trend is a necessary component of global efforts to achieve SDG 13 (Climate Action) by reducing greenhouse gas emissions. Investment strategies should reflect the heightened risk associated with these legacy assets.

Industrial, Equipment, and Technology Sectors: Engines of Sustainable Growth

The transition provides significant tailwinds for sectors that enable decarbonization. This progress is critical for achieving multiple SDGs:

• SDG 9 (Industry, Innovation, and Infrastructure): Industrial conglomerates like Caterpillar (CAT) and 3M (MMM), alongside energy equipment firms such as Schlumberger (SLB) and Baker Hughes (BKR), are pivotal in retrofitting existing infrastructure and developing new systems for green hydrogen and renewable energy.
• SDG 7 (Affordable and Clean Energy): The semiconductor industry, including firms like NVIDIA (NVDA) and AMD (AMD), provides the core technology for smart grids, EVs, and energy-efficient systems, which are essential for a successful transition to clean energy.

Macroeconomic Risks and Strategic Portfolio Recommendations

Fluctuations in energy prices, with gasoline’s 8% weighting in the CPI, present macroeconomic risks that could influence monetary policy. A sustainable investment approach must navigate these short-term risks while maintaining a focus on long-term decarbonization goals.

Recommendations for an SDG-Aligned Portfolio

1. Divest from High-Risk Legacy Assets: Reduce exposure to refinery stocks, particularly those in regions with structural underperformance (e.g., Phillips 66, Valero), to mitigate transition risks and support the objectives of SDG 13.
2. Reallocate Capital to Transition Enablers: Increase investment in industrial conglomerates, semiconductor manufacturers, and companies leading in hydrogen and renewable infrastructure (e.g., Plug Power). This strategy directly supports innovation and sustainable infrastructure as per SDG 9 and accelerates the adoption of clean energy under SDG 7.
3. Hedge Against Inflationary Volatility: Employ defensive fixed-income instruments and commodities linked to the energy transition to protect portfolios from potential inflation driven by short-term fossil fuel price instability, ensuring financial resilience while pursuing sustainable objectives.

Analysis of Sustainable Development Goals in the Article

1. Which SDGs are addressed or connected to the issues highlighted in the article?

The article discusses a major shift in the energy and industrial sectors, directly connecting to several Sustainable Development Goals (SDGs). The primary themes of moving from fossil fuels to clean energy, upgrading infrastructure, and reallocating economic resources align with the following SDGs:

• SDG 7: Affordable and Clean Energy: The core of the article is the “energy transition” away from fossil fuels (evidenced by declining refinery utilization) and toward “clean energy technologies” like electric vehicles and green hydrogen.
• SDG 9: Industry, Innovation and Infrastructure: The text highlights challenges with “aging infrastructure” and the need to “upgrade infrastructure and retrofit industries.” It points to the development of new sustainable infrastructure, such as “smart grids” and “green hydrogen infrastructure.”
• SDG 8: Decent Work and Economic Growth: The article describes a structural economic shift, urging capital to “reallocate from energy-intensive legacy sectors to industries poised to thrive in a decarbonizing economy.” This addresses economic transformation through technological upgrading and innovation.
• SDG 12: Responsible Consumption and Production: The article notes “consumer behavior shifts” toward electric vehicles (EVs) and “energy-efficient appliances,” driven by rising gasoline prices. This reflects a move towards more sustainable consumption patterns.
• SDG 13: Climate Action: The entire narrative is framed within the context of building a “decarbonizing economy.” The shift away from the “fossil fuel economy” and the “internal combustion engine” is a fundamental climate action strategy.

2. What specific targets under those SDGs can be identified based on the article’s content?

Based on the article’s discussion, several specific SDG targets can be identified:

1. Target 7.2: Increase substantially the share of renewable energy in the global energy mix.
   • The article supports this target by describing the decline of the fossil fuel sector (refineries) and the simultaneous “accelerating adoption of clean energy technologies,” including EVs and “green hydrogen infrastructure.”
2. Target 7.3: Double the global rate of improvement in energy efficiency.
   • This is addressed through the mention of consumer shifts toward “energy-efficient appliances” and the industrial demand for “efficiency upgrades” and “AI-driven predictive maintenance” in the refining sector.
3. Target 9.1: Develop quality, reliable, sustainable and resilient infrastructure.
   • The article points to the vulnerability of “aging infrastructure” and regional disparities in refinery performance. It implicitly calls for new, resilient infrastructure by highlighting growth in “smart grids” and “green hydrogen infrastructure.”
4. Target 9.4: Upgrade infrastructure and retrofit industries to make them sustainable.
   • This target is directly referenced when the article discusses the “need for efficiency upgrades” and “retrofitting demand” for industrial firms. The planned closure of refineries in California also represents an upgrade of the industrial landscape toward sustainability.
5. Target 8.2: Achieve higher levels of economic productivity through diversification, technological upgrading and innovation.
   • The article’s investment thesis is built on this target. It advises rotating capital from “legacy sectors” to “new growth engines” like “semiconductors and energy transition technologies,” which represents economic diversification and technological upgrading.
6. Target 12.c: Rationalize inefficient fossil-fuel subsidies.
   • While not mentioning subsidies directly, the article’s focus on the decline of the refinery sector and shifting consumer behavior away from gasoline aligns with the goal of reducing economic reliance on fossil fuels. The fact that gasoline expenditures are at their “lowest since 1999” indicates a market-driven rationalization.
7. Target 13.2: Integrate climate change measures into national policies, strategies and planning.
   • The article portrays the energy transition not just as a policy goal but as a market reality that investors and industries must integrate into their strategic planning. The discussion of a “decarbonizing economy” shows climate considerations are becoming central to economic and industrial strategy.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

The article provides several explicit and implied indicators to measure progress:

• Refinery Utilization Rate: Explicitly mentioned as 93.9%, with weekly and yearly declines. This serves as an indicator for Target 7.3 and 9.4, measuring the efficiency and structural relevance of fossil fuel infrastructure.
• Reduction in Refinery Capacity: The article states that California’s refinery capacity is projected to be reduced by 17% by 2026. This is a direct indicator for Target 9.4 (upgrading industries).
• Share of EVs vs. ICE Vehicles: An implied indicator. The article projects that “consumer demand for EVs is expected to outpace ICE models by 2026,” which measures progress toward Target 7.2 (clean energy share).
• Gasoline Expenditures as a Percentage of Disposable Income: Explicitly stated as 3.2%, the “lowest since 1999.” This is an indicator for Target 12.c, reflecting a shift in consumption patterns away from fossil fuels.
• Capital Allocation to Clean Energy Sectors: An implied indicator. The article’s core message is to “reallocate from energy-intensive legacy sectors” to semiconductors, hydrogen, and industrials focused on retrofitting. Tracking this capital flow would measure progress for Target 8.2.
• Investment in Green Hydrogen and Smart Grid Infrastructure: An implied indicator. The text identifies companies benefiting from demand for “green hydrogen infrastructure” and mentions the need for advanced chips for “smart grids,” measuring progress for Target 7.2 and 9.1.

4. Table of SDGs, Targets, and Indicators

Source: ainvest.com