Russia is gearing up for reduced oil revenues due to lower prices and a more lenient tax system, according to a draft three-year budget reported by Bloomberg.
The draft indicates that oil revenues could drop by 14% over the next three years if global oil prices remain weak. In 2025, the projected oil revenues are around $120 billion (10.94 trillion rubles), a decrease of 3.3% from this year. This decline is expected to continue into 2026 and 2027, with revenues potentially falling to $110 billion by then.
To avoid surprises from falling oil prices, Russia tends to use conservative projections for its budget. This strategy has historically helped the country avoid drastic spending cuts when prices drop unexpectedly.
For the 2024 budget, Russia expects an average price of $70 per barrel of Brent crude, which is forecasted to decrease to $69.70 in 2025, $66 in 2026, and $65.50 in 2027.
Natural gas prices are also expected to decline over the next four years, from $279.90 per 1,000 cubic meters this year to $240.20 per 1,000 cubic meters by 2027. Russia has already experienced a significant drop in oil revenues this year due to weaker prices. Since June, the value of Russian crude exports has fallen by 30%, despite increased export volumes. During this time, Russia’s main oil blend, Urals, fell below the G7 price cap of $60 but has since recovered to trade above $67 per barrel.
Looking ahead, the draft budget suggests that efforts to transition to cleaner energy will hurt crude oil demand. Currently, concerns about oil demand in China are driving prices down, even as August saw a significant rise in oil imports from both Russia and Iraq. In contrast, imports from Saudi Arabia decreased, likely due to higher prices.
Bloomberg’s BNEF has predicted that demand for transport fuels will peak in three years, largely due to the rise of electric vehicles (EVs). They claim that EV adoption has already reduced global crude oil demand by about 1.8 million barrels per day. However, EV sales are declining worldwide, except in China, where sales remain strong. In Europe, a key market, EV sales fell by 44% last month.
As Russia prepares for lower oil prices, there’s potential for prices to rise in the next couple of years, especially if OPEC+ maintains its production limits. There are plans to ease some cuts at the end of this year, but if prices stay below $80 per barrel of Brent crude, OPEC+ may rethink this decision.
The Russian budget forecasts indicate that sanctions have not severely impacted the country’s oil revenues. While a projected decline of $10 billion over three years is notable, it is less than 10% of 2024 revenues, suggesting that demand for oil remains robust even under sanctions.
This demonstrates that despite expectations of peak oil demand and further price drops, the global demand for oil continues to generate substantial revenue for Russia.
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