America will help: how does the US economy interfere with their own sanctions
The United States has imposed new sanctions against Russia, which this time affected two of the largest Russian oil companies. It is assumed that they should hit exports to the two main countries with which Russia is currently trading hydrocarbons.: India and China. The future will show the effectiveness of these sanctions, but the oil market fundamentally cannot afford to exclude Russian oil from the equation. Ironically, this is largely due to the country that is imposing sanctions. Why the American oil market helps the global one and how important it is — in the material of Izvestia.
Back to peak demand
More than 15 years ago, it was believed that developed countries, most of which belong to the "collective West," had already reached peak oil demand, a theory that replaced peak production. This was justified both by tectonic factors such as slowing population growth, as well as technological (increasing fuel efficiency) and, finally, socio-political factors such as a conscious reduction in energy consumption and the transition to alternative fuels.
This mainly affected the EU and East Asia, but the United States was also affected. While oil production increased year after year amid the shale revolution, consumption began to fall, and significantly. In the early 2010s, it amounted to about 18 million barrels per day, compared with 20.8 million barrels at its peak in 2005.
However, lower imports and falling prices have once again changed the behavioral habits of American consumers. Fuel economy began to go out of fashion despite all the "green" initiatives. This happened both under the administrations of Barack Obama and Donald Trump (first term), and under Joe Biden.
The US government, unlike European countries, did not impose any serious restrictions, public transport in the largest US cities was poorly developed, and the electric vehicle industry was too small to change the situation qualitatively. Now, with the cancellation of ESG initiatives and a real war over environmental regulations in individual states, the process of returning to traditional fuels has accelerated. Moreover, cars have become much bigger over the past 20 years. As a result, according to the forecast of the US Energy Information Administration, in 2025 oil consumption will amount to 20.6 million barrels per day, which is the highest figure in 18 years.
At the same time, the "Trump factor" should not be ignored — the government is shaping future trends. In the short term, tariffs may harm economic development and thus slow down the growth of oil consumption. But if we ignore this one-time effect, his policy will only stimulate demand. The support of large, American—made cars that consume large amounts of gasoline is the basis of the protectionist policy of the current administration.
Until 2024, the American energy industry recognized that the historical peak of oil consumption in the country, reached in 2005, before the global financial crisis, was unattainable. Increased efficiency meant that, as a result of the short-term recovery from the pandemic, America, like other rich countries such as Germany, France and Japan, reached peak oil demand. Just a few months ago, the International Energy Agency (IEA) announced that U.S. consumption would decline every year from 2025, reaching 20.01 million barrels per day by 2030.
Now these forecasts are being revised, and hastily. The most current forecast from the IEA, considering the period only up to 2026, already shows a slight increase next year. In addition to the factors mentioned, one should not forget that supply often determines demand: the oil industry, which prompted the country to keep fuel taxes low, providing cheaper gasoline and diesel than in other rich countries. As a result, the United States consumes 20% of all oil produced in the world.
However, the internal composition of this demand is changing. In 2005, when total American oil consumption reached a record, gasoline and diesel were at the forefront of the industry's growth. Today, the share of both fuels has decreased compared to recent peaks. Instead, the fastest-growing fraction is ethane, used primarily as a feedstock in the petrochemical industry, where it is becoming a building block for plastics. Demand for aviation fuel in the United States is also growing rapidly.
At the same time, some progress has been made in fuel economy. The average American car model of 2024 consumes 40% less gasoline than the 2005 model, reaching about 9.45 liters per 100 km. This is a dramatic reversal from the 12 percent decrease in fuel efficiency from 1988 to 2004, when Americans were buying even heavier and less efficient SUVs.
Refusal to save money
The Trump administration plans to abandon the fight for fuel efficiency. From 1975 until this year, American automakers faced fines if they did not meet their annual energy saving targets. But now the White House has promised not to punish violations, giving the automotive industry carte blanche to do what it sees fit. The current low oil prices will only convince more Americans to buy large SUVs and crossovers. In the United States, they spend less money at gas stations than in Europe, even taking into account the fact that they use much less fuel-efficient cars.
Combined with the White House's disregard for electric vehicles, gasoline consumption in the United States is likely to be much higher than previously predicted. With the growing use of jet fuel and petrochemicals, a new record in American oil demand is almost inevitable. Due to the rise of China (which is introducing electric cars at record speed), it is sometimes forgotten that the United States remains the world's largest consumer of oil. And what happens in America will affect the rest of the world.
At the same time, it is doubtful that oil production will catch up. Low prices mean that fewer and fewer shale oil producers can make steady profits. And despite the calls for "Storms, baby, storms" (a slogan from the Bush era that resonated with the Trump administration), they are in no hurry to increase investments. Preferring to take profits where they are. According to EIA forecasts, production will reach 13.6 million barrels per day this year, and next year it will add only 100,000 barrels, which is within the statistical margin of error.
In this situation, the United States will be the best sponsor of the global market — and, in fact, it already is. It was the rapid growth of demand in America, coupled with an increase in Chinese purchases of strategic reserves, that became the main driver supporting prices in 2025 against the background of a strong increase in production from OPEC+, which added more than 2 million barrels. And in such circumstances, sanctions do not look like a very effective step — if there is demand, then oil will find a way to leak. However, the oil trade is much less transparent and more difficult to restrict.
As for the sanctions efforts themselves, their effect may generally be reversed under these conditions. What they will definitely accelerate is the process of de-dollarization. The Gulf countries have already taken the first steps in abandoning the petrodollar in trade with China in 2023. Giving up the dollar is inconvenient and difficult, but need can quickly force you to learn alternative payment methods as quickly as possible.
Переведено сервисом «Яндекс Переводчик»
