MOSCOW, July 10 — The shift in global oil markets is becoming unmistakable. Russia, the world’s third-largest oil producer, pumped an average of 10.5 million barrels per day in 2024, with roughly half of that, about 5 million bpd, heading to export markets. Now, proposed tariffs of 25-35% threaten to slash those exports by 1-2 million bpd, according to analysts, as buyers begin hunting for cheaper alternatives.
The numbers tell a stark story. Global oil prices averaged $82 per barrel for Brent crude in 2024.
If Russian supply gets squeezed, historical elasticity suggests prices could jump by $5-10 per barrel. That’s not a trivial shift for an industry already watching every margin. The United States, now the world’s largest oil producer at 13.2 million bpd in 2024, could theoretically ramp up output to fill some of the gap.
But here’s the catch: US shale production growth is limited by infrastructure constraints. The capacity simply isn’t there to scale quickly.
Russia’s primary export grade, Urals crude, already traded at a $10-15 per barrel discount to Brent in 2024, partly due to the price cap. The proposed tariffs would widen that gap further, potentially pushing the discount to $20-25 per barrel. That’s a deep hole for Russian revenues, but it’s also a signal to buyers: the discount is getting steeper.
Who Buys, Who Pays
China and India together imported over 80% of Russia’s seaborne crude in 2024, a flow of about 3.5 million bpd. Those two countries face a tricky calculus. If they impose their own tariffs, their costs rise.
But if they keep buying at the deeper discounted prices, they might still come out ahead. The trend underneath is that the tariff structure could reshape traditional trade routes and alliances in the oil market.
Shipping is another piece of the puzzle. The cost of transporting Russian oil via tankers is expected to climb, driven by higher insurance premiums. That adds another layer of friction to a supply chain already under pressure from sanctions and shifting trade patterns.
The International Energy Agency projects global oil demand will hit 104 million bpd in 2025, up from 102.9 million bpd in 2024. That rising demand, combined with potential supply cuts from Russia, sets the stage for a tighter market.
Watch this space: the interplay between tariff policy, infrastructure limits in the US, and the buying decisions of China and India will determine whether the price spike materializes or gets absorbed. The trend is clear, but the outcome is anything but settled.
