Trends
AI likely to weigh on oil prices over the next decade, Goldman says
Goldman Sachs said that AI could potentially reduce costs by improving logistics and increasing the amount of profitably recyclable resources.
Headline
Goldman Sachs said that AI could potentially reduce costs by improving logistics and increasing the amount of profitably recyclable resources.
Context
OUR TAKE The impact of AI on energy and metals has mostly focused on the demand side given the expected boost to power demand. Negative impact on oil prices could decrease incomes of producers like the members of Organization of the Petroleum Exporting Countries and allies, known as OPEC+. — Iydia Ding, BTW reporter Artificial intelligence could hurt oil prices over the next decade by boosting supply by potentially reducing costs via improved logistics and increasing the amount of profitably recoverable resources, Goldman Sachs said on Tuesday.
Evidence
Pending intelligence enrichment.
Analysis
According to Goldman Sachs’ estimates, about 30% of the costs of a new shale well could potentially be reduced by AI. Additionally, an AI-induced 10% to 20% increase in the low recovery factors of U.S. shale could boost oil reserves by 8% to 20% (10-30 billion barrels). Brent crude futures were down $3.51, or 4.5%, to $74.02 a barrel, the lowest level since December. “We believe that AI would likely be a modest net negative to oil prices in the medium-to-long term as the negative impact from the cost curve (c.-$5/bbl) – oil’s long-term anchor – would likely outweigh the demand boost (c.+$2/bbl).” Goldman said. Also read: Goldman Sachs CEO discusses bitcoin’s potential and blockchain benefits Also read: Goldman Sachs makes bigger bet on $129B muni ETF market
Key Points
- Goldman Sachs said on Tuesday that AI could potentially reduce costs by improving logistics and increasing the amount of profitably recyclable resources.
- In contrast to electricity demand growth, Goldman Sachs predicts that oil prices could suffer over the next decade.
Actions
Pending intelligence enrichment.
