Transformation of World Oil Market: Drivers and Prospects

DOI: 10.20542/0131-2227-2023-67-10-5-18
S. Zhukov,
Primakov National Research Institute of World Economy and International Relations, Russian Academy of Sciences (IMEMO), 23, Profsoyuznaya Str., Moscow, 117997, Russian Federation.
I. Kopytin,
Primakov National Research Institute of World Economy and International Relations, Russian Academy of Sciences (IMEMO), 23, Profsoyuznaya Str., Moscow, 117997, Russian Federation.
A. Maslennikov,
Primakov National Research Institute of World Economy and International Relations, Russian Academy of Sciences (IMEMO), 23, Profsoyuznaya Str., Moscow, 117997, Russian Federation.
O. Reznikova,
Primakov National Research Institute of World Economy and International Relations, Russian Academy of Sciences (IMEMO), 23, Profsoyuznaya Str., Moscow, 117997, Russian Federation.
M. Sinitsyn,
Primakov National Research Institute of World Economy and International Relations, Russian Academy of Sciences (IMEMO), 23, Profsoyuznaya Str., Moscow, 117997, Russian Federation.

Received 16.07.2023. Revised 24.07.2023. Accepted 28.07.2023.

Acknowledgments. The article was prepared within the project “Post-crisis world order: challenges and technologies, competition and cooperation” supported by the grant from Ministry of Science and Higher Education of the Russian Federation program for research projects in priority areas of scientific and technological development (Agreement 075-15-2020-783).

Abstract. The world oil market is in the process of profound transformation. Under the influence of both long-term trends and recent exogenous shocks in the form of the global coronavirus pandemic and the geopolitical crisis around Ukraine, global oil demand, world oil production and trade in crude oil and petroleum products are being transformed in real time. The main driver of the restructuring of the oil market is the approaching risk of peak of global oil demand. On the supply side strengthening the position of the United States in world oil production, which is the result of technological breakthroughs in the methods of tight oil extraction is observed. The short-term elasticity of oil supply has increased markedly. Sluggish dynamics of global demand for oil against the backdrop of an expanding opportunity for a rapid increase in oil production have significantly reduced the risk of a shortage of oil supply, at least in the medium term. This forces the OPEC countries, which are in dire need of maximizing oil export revenues in order to maintain acceptable economic growth rates, to restrain oil production at the expense of their market niche. Western sanctions against the Russian oil and gas sector provoked a reorientation of Russian oil exports to the markets of friendly and nonaligned countries, primarily to India and China, as well as Turkey. In Europe, the former niches of Russian oil are taken by the United States and OPEC countries. To avoid the risks of falling under secondary sanctions, importers of Russian oil buy it with a price discount. In fact, world oil trade has taken a dual structure: the vast majority of oil is traded using market price quotations, while at the same time, a segment of trade in relatively cheap oil has emerged. Until 2022, this segment was formed by Iranian and Venezuelan oil, but it was much more modest in terms of absolute volume. The parallel existence of two segments in the world oil trade led to sharpening of competition between oil exporters. A return to normality could be a new shock for the oil market.

Keywords: world oil market, peak of global oil demand, technological breakthrough, tight oil, export, sanctions,OPEC+, USA, Russia, European Union, China, India


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For citation:
Zhukov S., Kopytin I., Maslennikov A., Reznikova O., Sinitsyn M. Transformation of World Oil Market: Drivers and Prospects. World Eonomy and International Relations, 2023, vol. 67, no. 10, pp. 5-18. EDN: SWGHXI

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