Artificial intelligence (AI) could potentially reduce costs in the oil industry, leading to a decrease in oil prices over the next ten years. Goldman Sachs released a note on Tuesday stating that AI could improve logistics and resource allocation, resulting in a $5 per barrel fall in the marginal incentive price. This could impact producers like OPEC+ members, reducing their incomes.
Goldman Sachs expects a modest AI boost to oil demand, but believes that the negative impact on the cost curve would outweigh this demand boost. According to their estimates, AI could potentially reduce costs of new shale wells by about 30% and increase oil reserves by 8% to 20% through improved recovery factors.
Recent market trends show a decline in oil prices, with Brent crude futures down to $74.02 a barrel and West Texas Intermediate crude futures at $70.58. U.S. technology companies are also looking to secure energy assets for AI and cloud computing data centers, further impacting the oil industry.
Analysis:
In simple terms, Goldman Sachs is predicting that the use of AI in the oil industry could lead to lower oil prices in the future. This could affect countries and companies that rely on oil production for their income. As a consumer, lower oil prices could potentially mean cheaper fuel and energy costs in the long run. However, it could also have broader economic implications on the global market and energy sector.
