Recently, there have been two significant changes in the global energy market: first, six EU countries called on the Group of Seven to lower the price ceiling for Russian oil; second, the amount of crude oil imported by the United States from Saudi Arabia has dropped to the lowest point in nearly 40 years. These two events not only reflect the dynamic adjustments in the energy market, but also reveal profound changes in the geopolitical landscape.

Sweden, Denmark, Finland, Latvia, Lithuania and Estonia jointly wrote to the European Commission, calling for a reduction in the $60 per barrel price cap set by the Group of Seven for Russian oil. These countries believe that lowering the price ceiling will further reduce Russia's oil export revenues, thereby weakening its financial support in the Russo-Ukrainian conflict, while not causing a shock to the market.

The G7 previously set a price cap on Russian seaborne crude and refined products, aimed at limiting Russia's revenue from oil trade. Specifically, the price cap for Russian crude oil is $60 per barrel, for refined petroleum products with high added value is $100 per barrel, and for refined petroleum products with low added value is $45 per barrel. Andriy Yermak, chief of staff to Ukrainian President Volodymyr Zelensky, stressed that energy exports are the main source of funding for Russia's conflict financing, that oil prices are directly linked to Russia's military capabilities, and that lowering oil prices would help advance the peace process.

Since the price cap was implemented in December 2022 and February 2023, the average market price of Russian crude oil has been below this cap. In the letter, the six EU countries pointed out that the current supply situation in the international oil market is good, and the risk of supply shock caused by lowering the price ceiling of Russian oil has been significantly reduced. Moreover, it would be difficult for Russia to stop exporting oil even if the price ceiling was significantly reduced, given its limited storage capacity and over-reliance on energy export revenues.

At the same time, U.S. crude oil imports from Saudi Arabia fell to a nearly 40-year low in 2024, a change that signals the weakening influence of Saudi crude in the United States. The United States buys just about 277,000 barrels a day of Saudi crude, down nearly 85% from the record 1.73 million barrels a day in 2003, according to Bloomberg calculations based on customs data. The trend dates back to 1985, when Saudi Arabia tried to push up oil prices by cutting production, leading to a brief drop in imports. To find consecutive years of similarly low import volumes, one would have to go back to the late 1960s.

The US shale revolution and the rise of the Canadian oil industry are the main reasons for the decline in imports. The three largest U.S. refiners - Marathon Oil Corp., Valero Energy Inc. and Exxon Mobil Corp. - have all stopped importing Saudi crude over the past two years or so. Exxon’s last purchase of Saudi crude was through November 2023, a sign that the companies did not renew their long-term contracts, ending a decades-long relationship.

Still, Saudi Arabia remains a powerful geopolitical force that can influence U.S. gasoline prices by adjusting production. As oil is a globally traded interchangeable commodity, Saudi Arabia’s actions will still have an impact in the United States. However, the decline in U.S. crude oil imports from Saudi Arabia is not entirely the result of the shale revolution. Saudi Arabia deliberately prices its oil out of the U.S. market by charging U.S. refiners a steep premium for each barrel of oil.

Riyadh set the premium for its flagship export oil product, Arab Light, at $5 a barrel above the U.S. sales reference price for most of 2023 and 2024, well above historical levels. Saudi Arabia uses its official selling prices as a tool to reduce the kingdom’s oil inventories, which are closely watched by traders, by reducing flows into the United States. Therefore, low Saudi Arabia-US flows became part of the OPEC+ production cuts. Although these two events seem independent, they are actually two aspects of changes in the global energy landscape. On the one hand, the six EU countries called for a reduction in the price cap of Russian oil, reflecting Europe's efforts to diversify energy supplies and reduce dependence on Russian energy.

On the other hand, the United States' reduction in Saudi Arabian crude oil imports shows significant progress in its energy self-sufficiency and the adjustment of its foreign policy in the Middle East. From a broader perspective, both events reflect the global energy market's shift from traditional supply dependence to diversification and self-sufficiency. Both the EU and the US are working to reduce their dependence on a single energy supplier and enhance their own energy security. This trend not only affects the supply and demand relationship in the international energy market, but also has a profound impact on the geopolitical strategies of relevant countries.

The call by six EU countries to lower the price cap on Russian oil and the US to reduce Saudi crude oil imports reflect the dual changes in the global energy landscape. These changes not only affect the supply and demand relationship in the international energy market, but also have a profound impact on the geopolitical strategies of relevant countries. As energy markets continue to adjust, countries will continue to seek a balance between energy security and geopolitical interests, pushing the global energy landscape toward a more diversified and stable direction.