While the rise of renewable energy stands to cut into demand for oil over time, that will not necessarily translate into lower prices, according to Daan Struyven, who heads up oil research for Goldman Sachs. Uncertainty about the pace of transition away from oil may play a role in keeping prices high.

“Over the next 20 years, global oil demand is widely expected to slow or fall,” Struyven says. “But the further out you look, the more forecasts diverge.”
This lack of clarity presents a challenge for oil companies, which don’t want to produce more oil than the world is willing to buy.

“Because the demand outlook is so uncertain, companies are delaying their investments in expensive, long-cycle projects,” Struyven says. “As existing projects get depleted, oil supply could drop – and rather than a surplus of oil, we may find ourselves with regular deficits.”

The uncertainty could also have a more direct impact on the prices of long-term futures. “Investors may require a premium in long-dated prices to compensate for the increased investment risk from high uncertainty about demand,” Struyven says.

These insights lead Struyven to a surprising conclusion: “Even if the world eventually uses less oil, the price of a barrel of oil could remain remarkably robust.”
Source: Goldman Sachs