AI Set to Impact Oil Prices in the Next Decade, Predicts Goldman
AI's potential to increase oil supply while lowering costs. The negative impact on oil prices may affect major producers such as OPEC+. According to estimates, artificial intelligence will result in significant cost savings and increased oil reserves.
AI is expected to increase oil supply by streamlining logistics, lowering costs, and improving the recovery of valuable resources. This shift could have a significant impact on the energy sector, particularly on demand, with an increase in power demand expected.
The potential negative impact on oil prices could result in a drop in revenue for major producers such as members of the Organisation of Petroleum Exporting Countries and their allies, also known as OPEC+. Goldman Sachs stated that AI's efficiency improvements in logistics and resource allocation could drive down costs, potentially resulting in a $5 per barrel reduction in the marginal incentive price, assuming a 25% productivity gain among early AI adopters.
According to Goldman Sachs, AI-driven increases in oil demand will be modest in comparison to the expected rise in demand for power and natural gas over the next decade. The firm believes that AI's overall impact on oil prices in the medium to long term will be slightly negative, as the cost curve's negative effect (c.-$5/bbl) is expected to outweigh the demand boost (c.+$2/bbl).
According to Goldman Sachs, AI has the potential to reduce the costs of developing a new shale well by about 30%. Furthermore, an AI-driven improvement of 10% to 20% in the low recovery rates of US shale formations has the potential to increase oil reserves by 8% to 20%, equivalent to 10-30 billion barrels.
Recent market movements reflect Goldman Sachs' concerns, with Brent crude futures falling by $3.51, or 4.5%, to $74.02 per barrel, their lowest level since December. Similarly, West Texas Intermediate crude futures fell $2.97, or 4.1%, to settle at $70.58 per barrel, the lowest price seen since January.
U.S. technology companies are actively looking for energy assets currently held by bitcoin miners. This strategic move is intended to secure a diminishing electricity supply for their expanding artificial intelligence and cloud computing data centres.
AI's potential to boost oil supply and reduce costs
Negative impact on oil prices could affect major producers like OPEC+
Estimates suggest significant cost reductions and increased oil reserves due to AI
Source: REUTERS