Given its many functions and importance – as a lucrative commodity, a crucial resource for daily life, and a critical tool in the national security arsenal, just to name a few – it is, perhaps, alarming that oil has had an interesting 2023 with 2024 shaping up to be just as eventful.
While the price of oil dropped only by approximately 3.41% over the last 52 weeks, the commodity experienced significant volatility over the course of the year. It very briefly fell as low as $63.7 in May 2023 and climbed as high as $94.7 in September 2023 before, by January 9, finding its footing at $72.
Several key factors come to mind immediately upon mentioning oil prices and production. The powerful group of oil-producing countries – OPEC – and its expanded iteration – OPEC + – has decided to cut production in the first quarter voluntarily, increasing the likelihood that the commodity will grow more expensive.
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On the other hand, the U.S. announced its plans to increase production, likely guaranteeing a more stable oil price at the beginning of 2024. Additionally, OPEC’s control over the world oil markets grew slightly weaker late last year as Angola decided to leave the group.
Geopolitical tensions and oil
Along with production turbulence, there are significant potential issues when it comes to transporting the commodity. Late 2023 saw a significant increase in geopolitical tensions – particularly in several oil-rich regions.
While the current conflict in Gaza has taken center stage, it is far from the only notable flashpoint in its region. There have been significant clashes in the West Bank, skirmishes on the Israeli-Lebanese border, and continuous attacks by the many factions of the so-called “Resistance Axis” on U.S. bases in Iraq and Syria, as well as a U.S. raid that killed an Iraqi officer.
In Yemen, the Ansar Allah movement (Houthis) have managed to impose a relatively successful blockade of the Red Sea – the singular southern approach to the Suez Canal and the Mediterranean – and the dissolution of the Republic of Artsakh has done little to diffuse the tensions between Armenia and Azerbaijan – a major oil producer.
Further north, the ongoing Russian war in Ukraine and the sanctions against Russia continue to limit European access to cheap oil. As of late 2023, the Western Hemisphere has also not been spared from increasing tensions, as Venezuela is claiming a part of Guyanese territorial waters in which significant oil reserves have recently been discovered.
Given the high levels of uncertainty and instability, as well as oil’s broad importance, Finbold decided to consult the two most prominent artificial intelligence (AI) platforms – OpenAI’s ChatGPT and Google’s (NASDAQ: GOOGL) own offering, Bard – on what the price of the commodity might look like at the tail end of 2024.
ChatGPT forecasts oil price range
Despite the troubling circumstances, ChatGPT foresees a somewhat stable year for the price of oil. According to the AI, the commodity is most likely to find itself somewhere between $71 and $80 – only slightly above the early January price of approximately $72.
ChatGPT sees the interplay between OPEC production cuts and U.S. production increase as the main driver of relative stability as it assesses that it will “lead to a stabilization of prices within a moderate range.”
The platform, however, also acknowledges that significant instability and uncertainty remain and sees geopolitical tensions, as well as the possibility of major green energy breakthroughs, as major challenges for oil prices in 2024.
Interestingly, when asked if it can identify a singular scenario that is at least somewhat plausible that could utterly shake the price of the commodity, ChatGPT pointed toward the possibility of a “debt bubble burst.”
According to the AI, such an event might occur should a major sector such as real estate crash, and could lead to a chain reaction with the potential of driving oil prices down to $30 per barrel.
Google Bard’s take on the future of oil
Google Bard also foresees only slight upward movement for oil prices by the end of 2024. The platform forecasts that the commodity will cost somewhere between $75 and $85 in late December.
It estimates that the forecast economic growth, the OPEC decision, and lingering geopolitical tensions are major factors driving the prices upward. On the other hand, it believes that green energy adoption, technological developments focused on boosting fuel efficiency, and “unforeseen events” are all putting downward pressure on the commodity.
When asked to identify a plausible “black swan” event, Bard offered a resurgent COVID-19 pandemic.
This could, according to the AI, drive the price as high as $90 or as low as $60, depending on its actual global reach and impact.
When challenged that the current political climate does not point toward renewed COVID-induced lockdowns, Bard opined that the fact only makes the matter more plausible:
“While not currently receiving widespread attention, the possibility of a highly transmissible COVID-19 variant remains a real concern. The emergence of Omicron in late 2021 demonstrated the virus’s capacity to mutate and evade control measures. Moreover, the uneven global vaccination rates and pockets of vaccine hesitancy create conditions for rapid spread.”
This article uses West Texas Intermediate (WTI) as the main oil price benchmark.
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