President Trump claims he has been tougher on Russia because rising U.S. oil exports have made it harder for Moscow to keep its share of the global energy market.
But the U.S. oil industry is skeptical of that claim, primarily because Russia appears to be increasing its oil exports in the last year, rather than losing out on market share to the U.S.
In fact, Russia is increasing its supply of oil, even as it is supposed to be going along with an OPEC-led pledge to cut oil production in order to avoid an oil supply glut and drive up prices. Russia doesn’t appear to be meeting its end of the Saudi Arabia-led OPEC deal, said Sabrina Fang, spokeswoman for the American Petroleum Institute, the lead trade association for the U.S. oil industry.
“Russia is an enigma in that they have pledged cutbacks to OPEC, but [the International Energy Association] and OPEC data still show their supply increasing,” Fang said in an email.
The only thing the U.S. oil industry can be certain of is that Mideast suppliers and OPEC have been in decline, she said. Their share has diminished as U.S. oil suppliers have stepped up to meet all new rising demand for oil, with the U.S. leading the world as the largest oil supplier.
It is OPEC members, countries like Saudi Arabia and the United Arab Emirates, rather than Russia that have suffered more from the U.S. ramp-up in oil production, according to API’s analysis.
In fact, both Russia and the U.S. are projected to drive most of the growth in oil production in the new year among non-OPEC countries, according to OPEC’s monthly report released Jan. 17.
“The US, Canada, Russia and Kazakhstan are seen to be the main growth drivers, while Mexico and Norway are estimated to show the largest declines” among non-OPEC members, the monthly report reads.
Meanwhile, demand for OPEC crude oil will be about 900,000 barrels per day lower than last year.
“Nobody has been as tough as I have from any standpoint, including the fact that we’re doing oil like we’ve never done it,” Trump said last week on Fox News, responding to media reports that the FBI is investigating whether he worked for the Russian government. “We’re setting records in our country with oil and exporting oil and many other things, which is obviously not great for them, because that’s where they get their money for the most part.”
Russia and the U.S. are increasingly competitors on the global energy stage, but it is not clear that U.S. oil exports will make it harder on Russia.
Trump is right to say that the Russian economy is heavily dependent on crude oil. Crude oil makes up nearly 30 percent of all of Russia’s exports, according to the Massachusetts Institute of Technology-supported Observatory of Economic Complexity. Most of Russia’s oil is exported to Europe, with a sizable uptick in supplies going to China in the last three years.
Russia supplied about 70 percent of Europe’s oil in 2016, according to the Energy Department’s Energy Information Administration. Most of that oil went to the Netherlands, Germany, Poland, and Belarus.
China received about 18 percent of Russia’s oil exports in 2016, the EIA said. Russia even pushed out Saudi Arabia for the first time in 2016 as the largest supplier of oil to China.
Meanwhile, Trump has sought to counter Russian natural gas exports to Europe. But natural gas comprises a much less sizable chunk of Russia’s energy exports when compared to oil.
By comparison, Russian crude oil comprises nearly $80 billion of the Russian economy annually, while natural gas exports is around $16 billion.
