Publications: Notes at the Margin

Oil Price Supported by AI Trillions (October 20, 2025)

 

According to the International Energy Agency, the global oil market will confront a surplus of three million barrels per day for the rest of 2025 and 2.4 million barrels per day in 2026.[i] By the end of next year, world stocks will be 1.1 billion barrels higher if these projections are correct.

 

This assumes, of course, that someone will buy the oil and that there is adequate storage capacity to hold it. More significantly, it assumes the current AI “bubble” does not pop. Thus, today, one person, OpenAI CEO Sam Altman, stands between the current oil price and oil at $10 per barrel.

 

If one googles “Sam Altman,” the search returns thirty-two million hits, one-third more than a search on ExxonMobil Darren Woods’ name. Altman founded his firm just ten years ago. Although the company is privately owned, various estimates put its value at around $500 billion.[ii] In contrast, ExxonMobil, which has existed for more than a century, is valued at $478 billion.

 

ExxonMobil dwarfs OpenAI in one dimension, however: income. The oil company is projected to book $341 billion in revenue in 2025.[iii] OpenAI expects its revenue to “triple” to $12.7 billion in 2025.[iv]

 

Those who follow fossil energy markets, including Exxon’s officers, likely scoff at OpenAI’s market valuation and that of many other firms looking for the AI pot of gold. Many also probably wonder how the chipmaker Nvidia can be valued at $4.45 trillion when its fiscal 2025 revenue totaled only $130 billion, less than half of ExxonMobil’s.[v]

 

The huge valuation gap between fossil fuel industry firms and the AI sector firms stems from insatiable investors rushing to get a piece of what they expect will be an enormous windfall, eventually, creating what is very likely a financial bubble.

 

The fossil fuel industry and policymakers should ignore any jealousy of the billionaire AI executives and hope the bubble does not collapse. Should it pop, the most significant losers will likely be world oil, gas, and coal producers. Today, Sam Altman stands as the sole barrier between crude in the $50s, where it is now, and oil at $10 per barrel. The bubble’s deflation would reduce economic activity sharply and, absent steep output reductions by OPEC+, result in very cheap oil.

 

The oil industry’s exposure stems from a bifurcated global economy. Activity associated with AI, particularly data center construction, is now surging ahead as activity everywhere else stalls. This suggests that an AI collapse that halted data center construction would substantially slow economic growth or even trigger a recession. Oil, gas, and coal use would likely shift from positive to negative growth, further expanding the inventory surplus.

 

Meanwhile, sanctions imposed on certain Chinese firms appear to have halted crude oil stockpiling there. The result, which may be intentional, is the loss of the one buyer holding up crude prices (see Notes of the Margin, September 15 and September 22).

 

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