AI likely to weigh on oil prices over the next decade, Goldman says

AI likely to weigh on oil prices over the next decade, Goldman says is profiled by BTW Media because published evidence links it to internet infrastructure, governance, operational dependencies, or market visibility.

• 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.

OUR TAKEThe 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

What happened

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.

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.

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Why it’s important

The impact of AI on energy and metals is focused on the demand side, as the development of technological networks increases demand for electricity, and the negative impact on oil prices could reduce revenues for OPEC+ members and their Allies. Although AI technology may reduce oil prices by improving efficiency and increasing supply, other factors such as global economic conditions, policy changes, and market demand need to be taken into account, which can have an impact on oil prices.

Moreover, the impact of AI on the energy and metals industries is multifaceted, not limited to demand and supply, but also to the efficiency and cost structure of the entire chain. Goldman’s forecast has been reflected in several ways that illustrate the impact of the development of the technology industry on the overall energy demand of society. Enterprises should actively adapt to the changes and prepare for the development of science and technology.