Oil at $100: how is Trump preparing the world for price shocks and what does this mean for Ukraine?

Global oil markets have once again held their breath. As Brent crude oil crossed the psychological $100 mark, Donald Trump’s comment came as a thunderclap: “You’re going to be very happy.” This is not just another politician’s statement, but a potential harbinger of tectonic shifts in global energy policy, capable of redrawing economic maps and influencing geopolitical alignments from the Middle East to the Ukrainian fronts. What is behind these words and what consequences will they have for each of us?

Trump's demarche: behind the scenes of oil statements

The former US president's words, spoken at the height of tensions in the Middle East and Russia's ongoing aggression against Ukraine, are not just a spontaneous remark. They are evidence of a deep understanding, or at least a desire to influence one of the most sensitive levers of the global economy - the price of oil. Historically, Donald Trump has always advocated American energy dominance, calling for increased domestic production and criticizing OPEC+ for "manipulating" the market¹His promise of “satisfaction” with oil prices directly hints at his belief in his own ability to influence the market, whether by increasing supply or through geopolitical arrangements.

Recent months have been marked by significant fluctuations in oil prices. In early 2024, despite many analysts’ forecasts of sluggish demand, the price of Brent rose again, approaching the triple-digit mark. This was facilitated by several factors: the escalation of the conflict in the Middle East, which threatens to disrupt supplies from key regions; continued production cuts by OPEC+, led by Saudi Arabia and Russia; and relatively stable global demand, which exceeded pessimistic expectations.². For consumers, rising oil prices mean higher fuel prices, higher transportation costs, which ultimately accelerates inflation and hits the pockets of ordinary citizens. In this context, Trump's promises can be perceived as a beacon of hope for stability, or as another element of campaign rhetoric designed to mobilize the electorate.

Oil geopolitics: from the Middle East to Ukraine

The price of oil is not only an economic indicator, but also a powerful geopolitical tool. For Russia, which is waging a full-scale war against Ukraine, high oil prices are a vital source of financing for military spending, despite Western sanctions.³Every dollar of oil price growth per barrel strengthens its military machine and allows it to withstand international pressure longer. Lowering prices, which Trump is likely seeking, could significantly undermine the Kremlin's financial capabilities, which in the long run will benefit Ukraine and its Western partners.

The Middle East remains the epicenter of global oil politics. The conflict between Israel and Hamas, Houthi actions in the Red Sea that threaten international shipping, and potential Iranian intervention create ongoing tensions that are automatically reflected in the risk premium for oil prices.⁴. Any statements Trump makes about oil are inextricably linked to his vision of regional security and his previous policy of “maximum pressure” on Iran. Perhaps his promises are based on assumptions about future conflict resolution or reformatting alliances that would reduce supply risks. World leaders, from Tokyo to London, are closely watching these maneuvers, because the stability of oil prices directly affects their economic prospects.

America First: Trump's Energy Doctrine and Its Legacy

Donald Trump's energy policy during his first term was clearly focused on the concept of "America's energy independence." He actively supported the development of shale oil and gas production, lifted environmental restrictions, simplified licensing procedures, and in every way promoted the export of American energy resources.⁵His administration believed that increasing domestic production would not only provide the United States with cheap energy, but also give Washington powerful geopolitical leverage in global markets.

This policy had its consequences. The United States became a net exporter of oil and gas, which significantly changed the global energy landscape. This allowed the United States to reduce its dependence on imports and gain greater freedom of maneuver in foreign policy. At the same time, this strategy often conflicted with the goals of international environmental agreements and caused concern among partners who preferred a more coordinated approach to global energy security and the fight against climate change.⁶If Trump returns to power, we can expect this line to continue, perhaps with an even greater emphasis on aggressively increasing production and ignoring environmental regulations, which could lead to an excess supply in the market and, as a result, to lower prices. However, such a scenario may meet resistance both within the US and from the international community concerned about climate change.

The future of the oil market: forecasts and challenges for consumers

Forecasting the future of oil prices is a thankless task, as the market is extremely sensitive to news, geopolitical events and economic indicators. However, experts from the International Energy Agency (IEA) and OPEC regularly publish their visions of developments. In general, most forecasts agree that oil demand will remain stable, although the growth rate may slow due to the development of renewable energy sources and the spread of electric vehicles⁷However, in the short term, oil will remain a key source of energy, and its price will remain a lever for influencing the global economy.

Rising oil prices at $100 per barrel are creating a number of challenges for consumers. This directly leads to higher costs for fuel for cars, heating and electricity. Then the domino effect spreads to other sectors: logistics, production of goods (especially those using petroleum products) become more expensive, which, in turn, pushes up inflation.⁸. Governments around the world are faced with a dilemma: how to support economies and citizens without inflating public debt. Many countries are already considering or implementing measures such as fuel subsidies, tax cuts or incentives for the transition to alternative energy sources to reduce dependence on oil fluctuations. The potential reduction in oil prices that Trump alludes to would be a relief for millions of people, but its implementation depends on many uncontrollable factors.

Strategic reserves and global alliances: who controls prices?

In addition to market mechanisms of supply and demand, there are also powerful instruments of state and interstate regulation of the oil market. Strategic Petroleum Reserves (SPRs), which are held by many countries, including the United States, the European Union, and China, are designed to stabilize the market in times of crisis or to counteract sudden supply disruptions.⁹Releasing oil from the SDR could significantly increase supply on the market and temporarily lower prices, as the Biden administration has already done in response to rising prices following Russia’s full-scale invasion of Ukraine.

OPEC+ is an informal alliance of major oil-producing countries, which includes OPEC members (Saudi Arabia, the UAE and others) and their allies, such as Russia. This alliance plays a key role in shaping world prices by coordinating production levels. Their decisions to reduce or increase production directly affect the market balance. Donald Trump is known for his critical attitude towards OPEC+, accusing them of inflating prices. If he returns to power, we can expect increased pressure on OPEC+ member countries, as well as, possibly, attempts to conclude bilateral agreements with key players, such as Saudi Arabia, to change their production policies in favor of American interests¹⁰However, Saudi Arabia and other producers have their own economic and geopolitical interests, and their willingness to bow to external pressure may be limited.

Ukrainian dimension: the impact of oil fluctuations on the national economy

For Ukraine, which is at war and actively fighting for its survival, oil prices are of critical importance. Ukraine is a net importer of petroleum products, which means that any increase in prices on the world market directly affects its energy security and economic stability.¹¹. High fuel prices increase logistics costs for the Armed Forces of Ukraine, make it more difficult to do business, and raise the cost of living for civilians. In addition, it increases the burden on the state budget, as the government is forced to allocate more funds for fuel purchases that could be directed to social programs or reconstruction.

The potential decline in oil prices that Trump has talked about would be positive news for Ukraine. This could reduce energy costs, free up additional resources for defense needs and reconstruction, and slow inflation. However, it is worth remembering that Trump's policy also involves pressure on Russia, which could be an indirect positive factor. However, any changes in global energy policy, especially those associated with a potential change of administration in the US, require careful analysis and the formation of its own energy sustainability strategies. Ukraine needs to continue to diversify its energy supply sources, develop its own alternative sources, and seek ways to minimize dependence on global price fluctuations, which will always carry an element of unpredictability.

Sources

1. The Wall Street Journal: Trump's Energy Agenda: More Drilling, Less Regulation
2. S&P Global Platts: Global Oil Market Outlook 2024
3. International Energy Agency (IEA): Oil Market Report (latest edition)
4. Council on Foreign Relations: Geopolitics of Oil in the Middle East
5. US Energy Information Administration (EIA): Annual Energy Outlook
6. The New York Times: Trump's Environmental Rollbacks and Their Impact
7. OPEC: Monthly Oil Market Report (latest edition)
8. International Monetary Fund (IMF): World Economic Outlook
9. US Department of Energy: Strategic Petroleum Reserve Fact Sheet
10. Reuters: OPEC+ Production Policy and Geopolitical Dynamics
11. Ministry of Energy of Ukraine: Analysis of the petroleum products market