Russia may cut oil production in response to the price ceiling. How will this affect the Russian budget

Alexey Belogoryev, Deputy Principal Director on Energy Studies of the Institute for Energy and Finance, commented to the Yamal-Media information portal on the prospects of a fall in oil production and oil revenues in Russia and on the impact of the expected reducing the Russian oil production on the world market.

Russian President Vladimir Putin said at a press conference in Bishkek that the government could cut oil production. However, there is no exact decision yet, TASS reported.

Alexey Belogoryev told, that next year the country's revenues from oil and gas exports would decrease. But from the point of view of the federal budget, this can be partially compensated by increasing the tax burden, as it was this year, the expert explained. However, the profit will still be less than before.

“In 2022, a unique situation was observed: on the one hand, prices for all energy resources rose sharply, and on the other hand, with the exception of gas, supply volumes remained fairly stable. As a result, total export earnings rose sharply. This will not happen in the coming years, because on the one hand, there will be a decrease in supply volumes, and on the other hand, prices are likely to decline. As for gas, it is still unknown, but the general expectation regarding the price of oil is that it will decrease,” the expert explained.

According to him, the stabilization of oil prices may remain at the level of $80 per barrel, but more unlikely. And the reduction in production will be somewhere around half a million barrels. This year there will be approximately 516-520 million tons of production, and next year 480-490. But this is the most optimistic scenario, the expert added.

He also noted that no other country has joined the countries that supported the price ceiling and is unlikely to join.