Russia's Oil Earnings Drop Despite Price Surge Due to Output Fall and Strong Rouble

Russia's energy earnings have dropped by 17% this year despite a surge in oil prices to more than decade highs. According to finance ministry data, tax proceeds from oil and natural gas production fell to 5.47 trillion roubles ($64.43 billion) in the first nine months of the year, down from 6.01 trillion roubles a year earlier. The energy sector contributes around 20% of Russia's budget tax proceeds, which is currently projected to run a 2026 deficit of 3% of GDP, nearly double the initial plan.

Russia's flagship Urals oil traded at over $92 at the end of September, double its price before the Ukraine war and a Western price cap of $44.10. The highest price of $113.89 was recorded on April 8, the highest since 2013, driven by supply disruptions in the Middle East. However, this price increase has been offset by a decline in output and a stronger rouble, which has weakened revenue in dollar terms.

Russia has lowered its outlook for crude oil and natural gas production and exports this year, marking a 17-year low. Crude oil production in August fell by more than 5.6% to 8.718 million barrels per day, down from 9.240 million bpd in January. The industry has faced constant Ukrainian drone attacks on oil refineries, forcing production cuts and triggering shortages across Russia's 11 time zones.

The rouble's strength has also impacted Russia's revenue. From January to August, the rouble was on average around 9% stronger against the dollar compared to the same period in 2025. As a result, the average January-August Russian oil price used for taxation increased to $66.70 per barrel from $59.12 a year earlier, a much smaller rise than in its dollar price.