To complete one of its major election agendas of providing cheap oil (‘Drill Baby Drill’), in his inaugural speech, US President Donald Trump used it for increasing domestic production of crude oil and prosperity in the US economy Argued to do.
His message to promote carbon-intensive fossil fuel is harmful to global decarbonisation initiative and climate change mitigation measures.
Trump’s appeal for American oil producers can be significant implications for the global energy market, including Russia, to extract more oil.
The US, being the largest oil producing country (produces 19,358 thousand barrels per day with a global share of 20.1 percent in 2023), has sufficient power to influence the global oil market.
An increase in American oil production can increase global energy supply, potentially reduced 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, with a global share of Mexico and 54 percent). Global oil production and prices have a relatively better control.
Russian oil
The decrease in crude oil prices in the global market is expected to adversely affect the Russian economy. It is especially more dependent on oil and gas exports that it is in war with Ukraine and is forced by several restrictive measures imposed by various European countries and the United States.
Low crude oil prices can reduce Russia’s revenue from energy exports, possibly affect their ability to fund domestic programs and military expenditure.
However, the actual impact of Trump’s declaration on Russia will also depend on other factors.
These include the global demand of oil and alternative sources of energy, reaction of other energy-producing countries (especially OPEC), reaction of American domestic producers and the effectiveness of various energy restrictions on Russia.
OPEC and Price Stability
On the other hand, this announcement is unlikely to have no significant impact on OPEC oil production decisions and pricing strategies.
Historically, as a cartel, OPEC usually adjusted its production level to maintain the prices of raw and stabilize the global crude market. Thus, it is likely that OPEC members will stand together as a reaction to any unilateral change in American oil production.
According to Gordon Cofman (A Petroleum Industry Specialist at Massachusetts Institute of Technology), if American oil production has increased, as a countermessor, members of OPEC, especially Saudi Arabia (who holds 12 percent stake in global crude Is.
Even exon, a major American oil and gas producers, do not expect the actual ramp-up of oil production by American companies in response to Trump’s policies.
Impact on India
Despite being the third largest crude oil importer (accounting for 10.3 percent of global crude imports in 2023), India is a value in the global crude market and has no control over the raw price. India’s sources of raw imports are quite diverse, but its import dependence for crude oil was up to 88 percent in 2023-24.
However, due to recent developments in global geopolitics (Middle East and Russia-Ukraine War disturbances), Russia has become a major source of crude oil imports for India, with low imports from Middle Eastern countries.
In 2022, after Russia invaded Ukraine, the European Union imposed a price cap on raw imports from Russia. In response, Russia offered adequate discounts on its crude oil compared to the global brant raw value, and India has taken advantage of this citing its unavoidable dependence on raw imports.
The discount on crude oil introduced by Russia was higher as US $ 15 to US $ 20 per barrel (than spot value). In 2021-22, Russia’s position was ninth with two percent stake in India’s crude imports.
Due to heavy raw imports from Russia at Russia’s price, Russia’s stake in 2023-24 increased to 33 percent, causing it to India for India, Iraq (21 percent), Saudi Arabia (16 percent), the largest for India after UAE Import became source. (6.4 percent) and America (3.6 percent). In 2023-24, crude oil imports (US $ 139.3 billion) were 21 percent of India’s total imports (US $ 678.2 billion).
Thus, a large part of the Indian treasury leads to raw imports, which do not include imports of various petroleum products. On the other hand, export of sophisticated oil products is a major source of revenue income for India.
In 2023-24, the total import of petroleum products (in addition to raw imports) was the value of US $ 23.3 billion (including US $ 10.5 billion LPG), while exports were US $ 47.7 billion (US $ 22.1 billion. And US $ 11.2 billion motor soul).
Trump’s discovery of cheap oil can be both stimulating and unfavorable implications for the Indian economy. Any decrease in global crude prices will definitely benefit the Government of India treasury and provide a high difference to domestic oil companies in India.
However, this clear propagation of fossil fuel-powered economic development strategy by the US President will create significant challenges for India and other developing countries that are most vulnerable to threat from climate change and global warming.
In addition, US withdrawal from Paris Climate Agreement under Trump 2.0 will also affect global initiative for carbon neutrality.
India is already experiencing various adverse effects of climate change such as intensive extreme weather events and its agricultural productivity and adverse effects on public health.
India had announced its objective to achieve the Pure Zero Emission target by 2070 in COP26 and adopted various measures for decarbonises to its economy, especially the energy sector.
The Indian economy is highly dependent on fossil fuels. The transport sector depends significantly on imported crude oil and gas. However, India’s recent progress is impressive to disintegrate its transport sector.
Electric vehicle (EV) sales in India increased from 1.53 million units in 2023 to 1.95 million units in 2024, which was 7.44 percent of the total vehicles sold in 2024.
In addition to EVS, increasing penetration of compressed natural gas (CNG) in the transport sector, a mandate for bi-fuel combination, and hydrogen-fuel vehicles (mostly in the pilot phase) are other major steps in the transport sector. India.
The major challenge of decurbonication through renewable energy in India is meeting large energy demands with a reliable source of energy where renewable energy is characterized by generation intimacy.
In addition, the availability of important minerals plays an important role in renewable-based energy technologies. The global market for important minerals is very concentrated and mainly dominated China.
Since India does not have sufficient significant minerals, its import dependence on China for important minerals will be a sufficient challenge for its energy security.
However, as indicated in this year’s budget, India is targeting 100GW nuclear capacity by 2047. Unlike renewal, nuclear power (with proper safety measures) can provide a reliable energy supply as a non-live source and ensure energy security.
Trump’s ‘Drill Baby Drill’, therefore, is unlikely to have a lot of impact on India’s energy security.
Saswata Chaudhary is Senior Fellow and Area Convenor, Energy Assessment and Modeling Division, The Energy and Resource Institute, New Delhi
Originally published under Creative Commons by 360INFO.
(This story is not edited by NDTV employees and auto-generated from a syndicated feed.)
