Goldman Sachs warns AI may reduce oil prices by boosting supply

AI could lower oil prices over the next decade by boosting supply and cutting costs, according to a report by Goldman Sachs. AI is expected to improve logistics and increase the amount of profitably recoverable resources, potentially reducing the marginal price incentive for oil by around $5 per barrel. This could have a negative impact on the incomes of oil-producing nations, including OPEC+ members.

While AI is expected to modestly increase oil demand, particularly in power and natural gas sectors, Goldman Sachs predicts that the cost savings enabled by AI will have a more significant effect on lowering oil prices. An estimated 25% productivity gain from AI could push prices down, outweighing the demand boost and resulting in a net negative impact on oil prices.

Goldman Sachs also forecasts that AI could reduce the cost of new shale wells by up to 30%. Furthermore, AI could increase the recovery factors of the United States‘ shale resources by 10% to 20%, potentially boosting oil reserves by 8% to 20%, or 10 to 30 billion barrels. This enhanced productivity could further contribute to downward pressure on oil prices.

Oil futures have already experienced declines, with Brent crude futures dropping by 4.5% to $74.02 per barrel, marking their lowest level since December. Meanwhile, West Texas Intermediate crude futures fell by 4.1% to $70.58, their lowest since January. As AI advances, US technology companies are also pursuing energy assets from bitcoin miners to secure power for their expanding data centres.