Yahoo Finance Could AI’s Potential for Lowering Oil Prices Impact the Shipping Sector?
Artificial intelligence will have impacts that reach far beyond what immediately meets the eye.
Goldman Sachs predicted that in the next five to 10 years, AI will bring down the price of oil.
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According to the note from Goldman, the technology’s impact could lower oil prices by about $5 per barrel as supply increases. However, it could also raise prices by $2 per barrel in times of peak demand.
That’s because, Goldman contends, about 30 percent of the cost of building a new shale well could be eliminated by AI. The technology may also increase shale’s recovery factor—which refers to the proportion of oil that can be recovered when mining. Today, shale has a relatively low recovery factor; the U.S. Energy Information Administration estimates that it ranges from, on average, 3 percent of 7 percent of oil in place.
Goldman estimates that recovery factor could see a 10 to 20 percent increase, which in turn would cause augmentation of oil reserves by 10 to 30 million barrels.
The note Goldman analysts wrote may flag the need for oil and gas companies to be proactive with their use of AI, to get ahead of the curve as much as possible. It also seems to indicate the decrease in cost could be rough for investors and oil companies, and particularly for those who get caught unprepared for further shifts in demand or technology.
But even as those executives work to figure out their next move, other industries’ leaders—like those in logistics—might be silently celebrating. Logistics companies reliant on oil for fuel and diesel could see the benefits of oil prices dropping; if prices drop and remain stagnant for an extended period of time, that could cause gasoline prices to fall, too.
Trucking and air cargo shippers, especially, may see the benefits of lower oil prices. PLS Logistics Services estimates that about 40 percent of the total costs associated with air cargo come from fuel requirements.
Stanford University research shows that air cargo and truck shipping are the two most energy-intensive modes of freight transportation in the U.S., and over 90 percent of the country’s transportation requires oil to function.
If lower oil prices eventually cause gas and other fuel prices to drop out, the logistics industry may be able to provide lower prices to its customers. Though that change is still several years away, any good news could be welcomed for an industry that has had its fair share of issues, driving high prices and struggles over availability to meet demand in some places.
While the actual impact lower fuel prices due to AI could have on logistics remains to be seen, what has started to become clearer is the myriad ways in which AI has the propensity to impact a slew of industries, whether directly or indirectly.
If Goldman’s projection that AI’s capabilities can lower oil prices is correct, that change is just the beginning of a series of impacts that will be felt throughout many industries—from logistics, aerospace, to engineering, to automotive and more. When core industries like those are implicated in minor changes, the differences in pricing or improvements to product can then flow through to clients of those industries.
For instance, if the cost of shipping apparel items via truck between Los Angeles and Pennsylvania decreases, big-box retailers could have a lot to gain.
This projection from Goldman is likely just the start of what could be a string of developments coming from AI’s proliferations. Inside the five to 10-year timeline Goldman suggests, major updates to AI are expected to occur, embedding the technologies into the day-to-day inner workings of most major industries.
This also comes against a backdrop of a general move away from legacy fuels. Ocean shippers are already pivoting to cleaner, green fuels and closer to home a greater share of middle and final-mile deliveries are utilizing electric vehicles.