Goldman Sachs sees global oil demand growing through 2040
News Summary
Goldman Sachs projects global oil demand to grow from 103.5 million barrels per day (mbpd) in 2024 to 113 mbpd by 2040. This growth is primarily driven by rising energy needs and persistent challenges in low-carbon technology and infrastructure. Goldman anticipates solid annual average demand growth of 0.9 mbpd between 2025 and 2030, subsequently slowing to 0.1 mbpd by 2040. Key factors cited for its above-consensus outlook include limited alternatives for jet fuel and petrochemicals due to technology bottlenecks, energy demand growth outpacing oil displacement even after road fuel peaks post-2030, and an indirect 3 mbpd boost from artificial intelligence-driven GDP growth by 2040. However, Goldman also identified downside risks such as faster progress in low-carbon technologies and potential economic recessions. On the day, oil prices largely held steady after declining around 4%, as investors weighed concerns about global oversupply against looming sanctions on Russia's Lukoil.
Background
Goldman Sachs' forecast for global oil demand, particularly being described as "above-consensus," contrasts with the prevailing narrative that the energy transition will lead to a faster peak and decline in oil demand. In 2025, the world finds itself in a complex balancing act between energy transition goals and the imperative for energy security and economic growth. The administration of President Donald J. Trump typically favors domestic oil and gas production and may be cautious about stringent climate policies, potentially influencing the direction of global energy policy. Concurrently, geopolitical tensions, such as sanctions on Russian energy companies, continue to introduce uncertainty and volatility into the global oil market.
In-Depth AI Insights
What are the strategic implications of Goldman Sachs' "above-consensus" long-term oil demand forecast, especially considering the current US administration's stance? - Goldman Sachs' forecast challenges the prevailing "peak oil demand soon" narrative, potentially signaling a more realistic assessment of the pace of energy transition. - This aligns with a potentially less aggressive climate policy under the Trump administration, where energy security and affordability often take precedence over rapid decarbonization, which could slow the shift away from fossil fuels in the U.S. and influence global sentiment. - For investors, it suggests that oil and gas majors might have a longer runway for sustained profitability, warranting a re-evaluation of their long-term cash flow projections, particularly in sectors with limited alternatives like aviation and petrochemicals. What are the potential investment opportunities and risks associated with Artificial Intelligence's (AI) "indirect" boost to oil demand growth? - AI-driven GDP growth translating into additional energy demand suggests that technological progress does not always lead to reduced energy consumption, especially in its early phases. This could benefit traditional energy infrastructure providers. - However, this "indirect" boost could also accelerate investments in more efficient and cleaner energy solutions to address rising carbon emission concerns from increased power demand, creating opportunities in renewables and energy storage. - A long-term risk is that if AI advancements lead to significant energy efficiency gains or new forms of energy production, this indirect boost could diminish or even reverse in the more distant future. How should investors balance long-term investment strategies in the oil and gas sector, given the downside risks from faster low-carbon technology progress and potential recessions? - Investors should focus on oil and gas companies that demonstrate strong capabilities in technological innovation and cost efficiency, as these are better positioned to navigate the pressures of the low-carbon transition and maintain profitability. - A hedging strategy is advisable, balancing oil and gas exposure with investments in renewable energy or carbon capture technology companies to mitigate risks from accelerated low-carbon tech development. - In anticipation of recessions, the oil and gas sector could face demand shocks, making companies with strong balance sheets and flexible production capabilities more resilient.