In late 2021 and early 2022, U.S. consumers coped with significant increases in energy prices. While the U.S. became a net petroleum exporter in 2020 in a historic shift, the U.S. Energy Information Administration (EIA) expects a return to net importer status in 2022.
For a net oil importing country, an increase in the price of oil acts as a growth headwind, forcing consumers and the economy as a whole to pay more for their energy consumption. Conversely, rising prices act as a growth tailwind for major net oil and gas exporters like Saudi Arabia and Russia, because they earn more revenue on every exported barrel of crude.
Net Importers Are Hurt by Rising Oil Prices
When oil prices rise, net importers of oil pay the price. Net importers are countries that import more oil than they export.
In the U.S. the burden of high oil prices on consumers is at least partly offset by the benefits to a domestic oil industry now once again producing more crude than any other country.
An increase in oil prices is more costly for countries producing little oil relative to what they consume, including Japan, China, Germany, India, and South Korea.
Net Exporters Benefit as Oil Prices Increase
Net energy exporters like Russia, on the other hand, see their export revenues rise alongside crude oil and natural gas prices. Oil and gas accounted for 60% of Russia's exports and 39% of federal budget revenue in 2019. The energy sector is estimated to contribute up to 25% of the country's gross domestic product (GDP).
Conversely, when energy prices drop, big exporters like Russia suffer. The 2014 oil price collapse badly hurt Russia's economy. Between June and December 2014, the Russian ruble declined in value by 59% relative to the U.S. dollar, fueling inflation that forced the Russian central bank to raise interest rates as high as 17%. By 2015, Russia, along with neighboring Ukraine, had the lowest purchasing power parity (PPP) relative to the U.S. of any country in the world. Declining PPP lowers living standards, as imported goods become more expensive.
Russia also receives less economic benefit from lower pump prices than the U.S. does, because Russians consume much less oil and gas than Americans. More than 70% of Russia's oil production is exported.
In 2021, with crude oil prices hitting seven-year highs, Russia reaped a windfall. Budget revenue increased 35% from 2020, while its current account surplus rose to 7% of GDP. Higher energy prices supported a broad economic recovery, with GDP up 10.5% year-over-year in Q2 2021 before slowing to a 4.3% annual gain as of Q3.