Trumps Oil Strategy: Will It Effect Russia?

Donald Trump has returned to the political stage with bold ambitions for the United States’ oil sector, hoping to weaponise American energy dominance to weaken Russia’s oil revenues, a key source of funding for its war in Ukraine. While the rhetoric of “Drill, baby, drill” captures headlines, the practicality of these ambitions raises serious questions among analysts and industry insiders.

Trump’s energy plan revolves around two central goals: flooding the global market with U.S. crude to depress prices and render Russia’s barrels uncompetitive, and enabling a full embargo on Russian oil exports without triggering global shortages or price spikes. While the concept appears straightforward, its execution faces significant hurdles in economics, logistics, and geopolitics.

The Challenge of Expanding U.S. Oil Production

A cornerstone of Trump’s plan is the 3-3-3 strategy, unveiled by his Treasury Secretary nominee, Scott Bessent. This ambitious proposal aims to increase U.S. oil production by 3 million barrels per day (bpd) by 2028. However, achieving this level of growth, equivalent to nearly a third of Russia’s daily exports, is far from guaranteed.

Shale oil, which has been the backbone of U.S. production growth for the past decade, comes with inherent economic constraints. According to the Dallas Federal Reserve, U.S. producers need an average oil price of $64 per barrel to justify drilling new wells, with existing wells becoming unprofitable below $50 per barrel. While Trump’s plan includes measures such as reducing red tape, increasing access to federal land, and offering tax incentives, these adjustments are unlikely to offset the underlying cost structure of shale production.

Additionally, the timeline poses a critical issue. Even if the U.S. meets its 2028 production target, it will come too late to fulfil Trump’s campaign promise of resolving the Ukraine conflict within weeks of assuming office. Oil production is a slow-moving process, reliant on years of planning, exploration, and investment. It is not a tool that can be wielded for immediate geopolitical leverage.

Russia’s Oil Resilience

While Trump’s strategy assumes that increasing U.S. production and lowering global prices will undermine Russia’s oil revenues, the reality is more complex. Russia’s oil industry is remarkably resilient, with production costs averaging between $11 and $17 per barrel. This cost advantage ensures profitability even in a low-price environment.

Moreover, much of Russia’s production costs are rouble-based, meaning a weaker rouble reduces dollar-denominated expenses. This has allowed Russia to weather Western sanctions and price caps with relative stability. Although sanctions have dented revenues, they have not significantly curtailed exports. Russia continues to ship approximately 7 million bpd, using intermediaries such as Turkey and shadow fleets to circumvent restrictions.

The scale of Russian exports also presents a significant challenge. While Trump’s plan targets an additional 3 million bpd from the U.S., replacing Russia’s 7 million bpd of exports is far more daunting. Comparisons to the 2018 sanctions on Iran, which successfully replaced 3 million bpd, fail to account for the vastly larger role Russia plays in global oil markets.

Economic and Geopolitical Risks

Trump’s strategy to flood the market with U.S. crude and lower global oil prices carries its own set of risks. Depressed prices could undermine the profitability of U.S. producers, leading to potential layoffs and weakening domestic energy independence. This would undercut the very gains Trump seeks to achieve.

On the geopolitical front, the policy risks straining relationships with key allies. Saudi Arabia, a vital U.S. partner and influential OPEC member, has worked to stabilise oil prices through coordinated production cuts under OPEC+ agreements. Any unilateral U.S. move to lower prices significantly could provoke tensions with Riyadh, potentially jeopardising broader Middle Eastern alliances.

Furthermore, Trump’s approach signals a sharp pivot away from the Biden administration’s balanced energy policy, which supported renewable energy alongside moderate oil production growth. This shift could alienate European allies, who have prioritised clean energy transitions, and complicate international cooperation on climate initiatives.

Limited Impact on Russia’s Finances

While Trump’s strategy aims to weaken Russia by cutting its oil revenues, the potential impact is limited. A $10-per-barrel drop in oil prices would reduce Russia’s annual export revenues by an estimated $25 billion. While significant, this represents less than 7% of Russia’s total exports and is unlikely to cripple its economy.

Moreover, Russia has adapted to sanctions by redirecting its crude to markets like China and India, often at discounted rates. These nations have proven willing buyers, softening the blow of Western-imposed price caps. Additional sanctions or stricter price caps would face enforcement challenges, limiting their effectiveness in further reducing Russian revenues.

A Reality Check for Trump’s Promises

Since the onset of the Ukraine war, the West has made progress in reducing Russia’s oil revenues, but further reductions are proving increasingly difficult. Trump’s plan to accelerate this process relies on assumptions that do not align with market realities. Oil production cannot be ramped up overnight, and the global reliance on Russian exports makes a full embargo impractical.

Trump’s pledge to end the Ukraine conflict within weeks of taking office hinges on leveraging U.S. energy dominance. However, the complexities of oil production and global market dynamics reveal that such ambitions are unlikely to deliver immediate results. Achieving meaningful impact requires a long-term, multifaceted approach that goes beyond campaign slogans.

Conclusion

Donald Trump’s oil strategy, while bold and headline-grabbing, faces numerous obstacles that challenge its feasibility. The U.S. shale industry cannot quickly scale to replace Russian exports, and Russia’s low production costs and adaptable trade strategies ensure a level of resilience that even aggressive U.S. policies are unlikely to erode significantly.

To truly undermine Russia’s oil revenues, a more comprehensive strategy is required—one that addresses not only production growth but also enforcement mechanisms, international cooperation, and the broader geopolitical landscape. Without such a nuanced approach, Trump’s energy ambitions risk falling short of their intended impact, leaving Russia’s oil-funded war machine largely intact.

As the world watches, the question remains: can Trump’s energy policies move beyond campaign rhetoric to deliver meaningful results on the global stage? For now, the answer seems far from certain.