EXPLAINER: What’s the effect of Russian oil price cap, ban?
Associated PressNov 24, 2022
Negotiations entered their third day on Friday, as EU countries remained divided over what level at which to cap the prices of Russian oil exports — an initiative aimed at limiting the financial resources available to Moscow to fight the war in Ukraine.
The G7 proposed a cap of $65-$70 per barrel — close to current market rates — but countries such as Poland, Lithuania and Estonia argue that rate would make oil too profitable for Russia, as production costs are roughly $20 per barrel. Others including Germany, Austria, Denmark and the Netherlands believe that going any lower could make gas supplies scarce and lead to a spike in prices from elsewhere.
A cap on Russia's oil exports will further strain the resources available to Moscow for fighting its war in Ukraine, while alleviating price instability if Russian oil is taken off the market — it must be implemented.
With countries such as China, India and others unlikely to go along with the EU's proposals, it's highly unlikely that they will be successfully implemented or work, even if support for the measures can be consolidated. A price cap is a ridiculous idea.
A cap on the price of Russian oil goes against the principles of international trade and would have grave consequences for the global energy market.
There's a 50% chance that the price of oil will be at least $88.3 per barrel by December 2022, according to the Metaculus prediction community.