AI likely to influence oil prices over the next decade, Reuters’ Goldman says

(Reuters) – Artificial intelligence could affect oil prices over the next decade by increasing supply by potentially reducing costs by improving logistics and increasing the amount of profitably recoverable resources, Goldman Sachs said on Tuesday.

WHY IT’S IMPORTANT

The impact of AI on energy and metals has focused mainly on the demand side, given the expected increase in energy demand.

The negative impact on oil prices could reduce the income of producers such as members of the Organization of the Petroleum Exporting Countries and allies, known as OPEC+.

KEY QUOTE

“AI could reduce costs by improving logistics and resource allocation…resulting in a $5/bbl drop in the marginal incentive price, assuming a 25% productivity gain observed for early adopters of AI,” he Goldman Sachs said in a note.

Goldman expects modest potential AI growth in oil demand compared to the impact of energy demand over the next 10 years as well.

“We believe AI would likely be a modest net negative for oil prices over the medium to long term, as the negative impact of the cost curve (c.-$5/bbl) – the long-term anchor of oil – would likely outweigh demand growth ( c.+$2/bbl),” Goldman said.

BY NUMBERS

According to Goldman Sachs estimates, around 30% of the costs of a new shale well could be reduced by AI. Additionally, an AI-induced increase of 10% to 20% in the low recovery factors of US shale could increase oil reserves by 8% to 20% (10-30 billion barrels).

CONTEXT

Futures fell $3.51, or 4.5 percent, to $74.02 a barrel, the lowest since December. West Texas Intermediate crude futures were down $2.97, or 4.1%, at $70.58 – their lowest price since January. (OR)

US tech companies are eyeing energy assets owned by bitcoin miners to ensure a steady supply of electricity for their rapidly expanding artificial intelligence and cloud computing centers.