Trump’s promotion of fossil fuel-driven growth poses significant challenges, but there are mitigating factors as well.
To fulfill one of his major electoral agendas of providing cheap oil (“drill baby drill”), in his inaugural speech U.S. President Donald Trump argued for increasing the domestic production of crude oil and utilizing it to spur prosperity in the U.S. economy.
His message of promoting carbon-intensive fossil fuels is detrimental to global decarbonization initiatives and climate change mitigation measures.
Trump’s appeal to U.S. oil producers to extract more oil may have significant implications for the global energy market, including Russia. The U.S., being the single largest oil-producing country (it produced 19,358 thousand barrels per day in 2023 with a global share of 20.1 percent), has substantial power to influence the global oil market. The increase in U.S. oil production could lead to a surge in global energy supplies, potentially driving down prices.
However, as a production cartel, the Organization of the Petroleum Exporting Countries (OPEC) with a global share of 35.3 percent (in 2023) or OPEC+ (OPEC+Russia, Mexico and a few others with a global share of 54 percent) has relatively better control over global oil production and prices.
Russian Oil
Any reduction in crude oil prices in the global market is expected to have an adverse impact on the Russian economy. It is heavily reliant on oil and gas exports especially now that it is at war with Ukraine. Russia’s economy is constrained by several restrictive measures imposed by various European countries and the United States.
Lower crude oil prices could reduce Russia’s revenue from energy exports, potentially affecting its ability to fund domestic programs and military expenditures. However, the actual impact of Trump’s announcement on Russia will depend on other factors as well. These include the global demand for oil and alternative sources of energy, the response of other energy-producing countries (especially OPEC), the response of U.S. domestic producers, and the effectiveness of various energy sanctions on Russia.
OPEC and Price Stability
On the other hand, this announcement is unlikely to have any significant impact on OPEC’s oil production decisions and pricing strategies.
Historically, as a cartel, OPEC has usually adjusted its production levels to maintain crude prices and stabilize the global crude market. Thus, it is likely that OPEC members will continue to stand together and adopt appropriate measures as a response to any unilateral changes in U.S. oil production.
According to Gordon Kaufman, a petroleum industry expert at the Massachusetts Institute of Technology, in case there is an increase in U.S. oil production, as a countermeasure, the OPEC members, especially Saudi Arabia (which holds a 12 percent share in global crude extraction), may even reduce their own production to keep global prices stable.
