Thoughts on the AI-Energy Security-Climate Nexus
Climate Week in New York was inspiring. With a thousand-plus events, record-breaking international government and executive participation, and an estimated 100,000 people attending in person from around the world, the week demonstrated that momentum was still on the side of action.
Speakers and panelists addressed a wide range of topics, but throughout, a small number of themes recurred again and again.
Along with the commitment to climate as an urgent issue was the recognition that the most successful solutions are those that achieve multiple goals and are supported by strong business cases. Fortunately, many of these solutions exist and are scaling. Across many use cases, renewables, heat pumps, and EVs are faster, cheaper, and better than the alternatives.
Almost every talk I attended mentioned AI, and whether things like AI-driven supply-chain efficiencies, clean generation, and recycled waste heat could offset the massive new electricity demand from data centers.
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Less discussed was something I want to write about today: how AI is being used to help the fossil fuel industry increase and extend production — and the implications of this for both climate and energy security.
The Perils of AI-Enhanced Oil Recovery
Last week, the global energy consulting firm Wood Mackenzie issued a report describing how AI-powered analysis could “squeeze every lost drop” of oil from existing fields.
The report warned that without higher recovery rates, global oil supply will fall far short of demand:
Total liquids demand under our base-case Energy Transition Outlook scenario is just less than 1,000 billion barrels through 2050. Without upgrades to current development plans, today’s onstream fields are set to fall short by almost 300 billion barrels.
These projections follow the “base case” scenario presented in Wood Mackenzie’s 2024-25 Energy Transition Outlook, which assumes that the world misses the Paris Agreement’s 2050 goals and doesn’t achieve global net zero emissions until 2070.
While the Outlook concedes that a faster transition is possible, achieving it would require an immediate peak in energy demand, followed by rapid deployment of negative-emissions technologies, nuclear power, long-duration storage, and geothermal. Given that no large country is on track to meet its 2030 climate goals, Wood Mackenzie believes that it is unlikely.
In other words, while the world has made incredible strides toward energy transition, we are still falling short of what is needed to avoid both a catastrophic rise in temperature and a serious energy shortfall.
AI Comes to the Rescue — of the Oil Industry
Fortunately — or unfortunately — innovations in AI offer a path forward — for the oil industry.
Over the last few years, activists have called out big tech companies for undermining their own aggressive climate targets by using AI to help oil companies facilitate more extraction.
But while the enabled emissions story has gotten some attention, the geopolitical dimension — the question of where and what kind of production is being sustained — has been largely overlooked.
The Wood Mackinzie report adds another wrinkle to this story. Using a new proprietary Synoptic AI-powered tool, the company showed how
“Better recovery from existing fields could yield an additional 470 billion to over 1,000 billion barrels of oil, easily wiping out the 300 billion barrels supply gap to 2050 under our base case demand outlook.”
Wood Mackenzie’s “AI analogue finding” mines global oilfield data — including 60 different parameters over more than 30,000 fields worldwide — to identify fields that share similar characteristics and zero in on best practices for extending production.
The report describes this process as “a big leap forward from outdated filtering-based methods.”
If every field were to achieve top- quartile performance, this would boost average recovery factor to 34%, adding 470 billion barrels of reserves. Best-in-class performance would increase the average recovery factor to 41% and add more than 1,000 billion barrels.
Geopolitical Implications
The idea of using new technology and advanced approaches to find and extract more oil isn’t new. From the early days of rotary drilling and seismic surveys to the rise of offshore platforms, fracking, and horizontal wells, each wave of innovation has pushed the boundary of what counts as economically “recoverable.”
In the U.S., conventional production drove much of our global economic dominance and the postwar boom. But when U.S. production peaked in 1970 and began to decline, the balance shifted. OPEC gained leverage, and the oil shocks of 1973 and 1979 reshaped the global order — fueling inflation, sparking recessions, and exposing the vulnerability of energy-importing economies.
By the early 2000s, it seemed the world was facing another reckoning. Global conventional production appeared to plateau. Prices spiked to historical levels. Analysts warned of “peak oil” — the idea that supply would soon fall short of demand, with destabilizing consequences for economies dependent on cheap, abundant energy. On July 11, 2008, the price of crude oil reached an eye-watering all-time high of $147.27 per barrel.
While high oil prices can’t entirely be blamed for the subprime mortgage crisis, they definitely didn’t help; higher gasoline and energy prices left households with less disposable income, further straining budgets that were already stretched by adjustable-rate mortgages.
Innovation bought the industry another reprieve. Hydraulic fracturing and horizontal drilling unlocked vast reserves of “tight oil” in the United States. Within a decade, the U.S. became the world’s largest producer again, temporarily easing fears of scarcity and reducing dependence on foreign oil.
But fracked wells decline much faster than conventional ones. A number of analysts now argue U.S. shale production has already peaked. In May 2025, Diamondback Energy — a major shale producer — warned that production would likely soon decline.
Unlike fracking, Wood Mackenzie’s AI-enhanced recovery targets older conventional fields. The analysis says that over two-thirds of this additional recovery potential lies with national oil companies (NOCs) and state-controlled enterprises.
Historically, international oil companies (IOCs) have been more effective at production, making them “victims of their own success, with only a small share of global upside remaining in their operated portfolios.”
That means that countries like Iran, Venezuela, Iraq, and Russia are likely to gain disproportionately from from the next phase of reserve growth. In other words, just as the U.S. leveraged fracking to reduce dependence on OPEC and reshape global energy markets, AI could now hand that same kind of leverage back to authoritarian petrostates.
It is possible, of course, that AI could also greatly increase reserves for unconventional oil (like tight oil or shale oil) or open up new conventional reserves. But if history is any guide, this is unlikely, as the report points out.
There are unlikely to be anywhere near enough new fields to offset the natural decline of existing supply … Since the 1980s, the industry has been meeting growing oil demand with ever- upward revisions to existing fields and only a subordinate contribution from new finds. The gap between discoveries and production has widened with each passing decade.
Implications for Energy Security
All of this suggests that energy security—not just climate—is about to take center stage as the driver of energy transition. AI-enhanced oil recovery makes this shift more urgent by threatening to strengthen the very regimes that importing nations are trying to reduce their dependence on.
Recent reports from Ember and The Carlyle Group make exactly this case. As both argue, the post-war global international order, in which the United States Navy facilitated a stable oil trade, has broken down. As a result, the “green premium” driving energy transition is being replaced — or at least supplemented by — an “energy security premium.”
As the Carlyle report explains,
The reason we use fossil fuels is because they are storable, portable, energy dense, and easy to use. This means they can be moved from where they are abundant to where they are needed—thus facilitating industrialization and economic growth … In contrast, non-fossil fuels are not traded and grow in demand when energy security is paramount.
Ember puts it more starkly:
Rising regional conflicts, increasingly contested maritime routes, and intensifying tariff wars have placed global trade under greater threat than at any time since World War II. What was once seen as efficient interdependence has become a national security liability. If energy imports were cut off, three-quarters of the world’s economies would grind to a halt—trucks would stop, factories would shut down, and lights would go dark.
The obvious answer to this risk is to shift away from dependence on fossil fuels to an “electrotech” strategy that leverages renewable energy and the electrification of transportation and buildings — the same strategy needed to decarbonize and minimize the impacts of climate change.
Countries have every incentive to push for this transition. AI-enhanced oil recovery makes the stakes even higher—and the window for action potentially narrower.
That’s it for today. Thanks for reading, and feel free to forward this to anyone who might find it useful. As always, feel free to drop me a line. I’m curious to learn how security concerns are playing out in your corner of world.