Donald Trump has long maintained that reducing global oil prices is key to ending conflicts, particularly the war in Ukraine.
During both his election campaign and his current presidency, he has emphasised the need to bring down oil prices as a means to weaken Russia’s economic ability to sustain its military aggression. However, while the idea is simple in theory, its execution is constrained by the complex realities of the global oil market.
The Oil Market Dynamics
The global oil market is influenced by three major players: the United States, Saudi Arabia, and Russia. While the U.S. remains a major producer, Saudi Arabia and Russia have coordinated efforts through the OPEC+ alliance to control production levels and maintain higher prices.
For years, Saudi Arabia and Russia have worked together to stabilise oil prices in a way that maximises their revenues, but this alignment may now be shifting with Trump’s return to office.
The crux of Trump’s strategy relies on Saudi Arabia breaking away from its collaboration with Russia. Saudi Arabia possesses the capacity to flood the market with oil, driving prices down, but it has little incentive to do so without significant concessions from Washington.
Trump’s potential leverage in this scenario is a broader security pact with Riyadh, something the Saudis have long sought but have struggled to secure under previous U.S. administrations.
Saudi Arabia’s Position
Saudi Arabia is unlikely to lower oil prices without guarantees of American security commitments. Riyadh has repeatedly sought a defence agreement with the U.S. akin to the Japan-U.S. Security Treaty, which would ensure direct military protection. This is particularly significant given the threat posed by Iran and its regional proxies, including the Houthis, who continue to target Saudi infrastructure.
Additionally, the Saudis aim to secure access to advanced U.S. weaponry, including the same cutting-edge military technology provided to Israel.
Another long-standing demand from Riyadh is access to nuclear technology under civilian pretexts but with the potential for military applications in the future. Trump may be open to these negotiations, but he will likely demand substantial Saudi investment in the U.S. economy in return—potentially to the tune of $600 billion.
The Russia Factor
Should Saudi Arabia shift its alignment towards the U.S. and increase oil production, the effects on Russia’s economy would be significant. However, simply reducing oil prices to $50 per barrel may not be sufficient to cripple the Russian war effort.
Historically, Russia has endured lower oil prices, and while it would experience financial strain, it would not necessarily force Moscow to cease its military operations in Ukraine.
For a truly destabilising impact, oil prices would need to fall closer to $30 per barrel over an extended period—something that would also threaten the profitability of U.S. shale oil production.
A major risk factor for Trump is the reaction of American oil companies. The U.S. shale industry has thrived on relatively high oil prices, and a dramatic drop could make production unprofitable, particularly for companies focused on shale extraction.
Many of these firms have substantial investments not only in the U.S. but also in Kazakhstan, where oil is transported via Russian infrastructure. If tensions with Russia escalate further, American companies operating in Kazakhstan could find themselves at risk of economic retaliation, potentially disrupting global supply chains.
The Iranian Element
Another key consideration is Iran. The U.S. has consistently viewed Tehran as a major threat, and Trump’s foreign policy remains heavily influenced by his staunch support for Israel. Weakening Iran through lower oil revenues aligns with both U.S. and Saudi strategic interests.
However, a significant drop in oil prices would also boost China’s economic position, as Beijing is a major energy consumer. This presents a dilemma for Washington, as countering Chinese economic growth remains a top U.S. priority.
The Road Ahead
Trump’s approach to global oil prices is likely to involve intense negotiations with Saudi Arabia. His suggestion of making Riyadh his first foreign visit, rather than following the traditional trip to the United Kingdom, signals the importance he places on U.S.-Saudi relations in his energy strategy. The outcome of these talks will determine whether a U.S.-Saudi oil alliance can emerge to challenge both Russia and Iran in the energy market.
However, oil market dynamics are difficult to control. If Saudi Arabia significantly increases production, other OPEC+ members may follow suit, leading to a wider collapse in prices that could have unintended consequences.
Moreover, Trump’s policies will have to balance the competing interests of American energy companies, foreign policy priorities, and domestic economic considerations.
Ultimately, while lowering oil prices may contribute to economic pressure on Russia, it is unlikely to be a standalone solution to ending the war in Ukraine. More direct measures, such as continued military support for Ukraine and sanctions targeting Russia’s oil infrastructure, will remain crucial.
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