Connect with us

Hi, what are you looking for?

WORLD NEWS

Western countries set a price ceiling for Russian oil

Western countries set a price ceiling for Russian oil

While the crisis in Ukraine continues, Western nations have been debating how to reduce Russia’s oil earnings without creating severe disruptions to energy markets in which Russia plays a significant role.

They believe they have found an innovative solution: starting today, the G-7 (a group of major democracies) and Australia will impose a price restriction on Russian oil of $60 per barrel.

How does this help them achieve their objectives?

  1. It keeps Russian oil flowing to countries that still buy it (India, China, Turkey), which helps stabilize energy markets that have been on a roller coaster this year.
  2. Russia is forced to sell its oil for cheaper than it wants to, which could dent Vladimir Putin’s ability to fund his war in Ukraine. Sales of oil and gas are estimated to account for 42% of Russia’s total revenue this year.

But imposing a “price ceiling” on oil is not enough, and Western countries had to go outside the box to devise a method for enforcement. What they decided: Western countries control the marine industry, on which Russia depends to transport its oil.

As a result, the G-7 is informing Western corporations that they cannot guarantee, finance, or move Russian oil priced above $60 per barrel.

What are the drawbacks to this plan?

  1. Russia’s response. Russia said it would not accept the price cap and pledged to cut off oil exports to countries that comply with it, a threat that could cause energy prices to shoot higher (but hasn’t so far). Russia has also been assembling a “shadow fleet” of more than 100 ships to help it move oil without relying on Western maritime companies.
  2. The price may not be right. One of the sticking points to negotiations was figuring out the sweet spot for the price cap. Ukraine, for one, believes it’s far too high and that it won’t be effective in draining Putin’s war chest.

The oil market is currently more adrift than the Lost authors. Geopolitical influences (slowing global economy, Ukraine war, China’s evolving Covid policy) are pulling prices in both directions, and the prevailing feeling at an OPEC+ summit last weekend was “Let’s not do anything radical and watch how this thing develops.”

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Trending

LOCAL NEWS

A house near Globe and Phoenix Mine in Kwekwe has been “swallowed” by a mine tunnel. According to the Permanent Secretary of the Ministry...

LOCAL NEWS

In a horrifying case of family violence, two innocent children were stoned to death along with their 81-year-old grandfather at Mhari Village in Bikita...

Celeb Gossip

And the first question that runs in your mind when you here this is, who is the father? Pokello has of late been rumored...

LOCAL NEWS

Mystery surrounds the whereabouts of the controversial self styled whistle-blower, Susan Mutami following an eletric period of exposing ZANU PF President Emmerson Mnangagwa and...

LOCAL NEWS

KUNZWANA Women’s Association director, Sekayi Wade, has been accused of embezzling about US$200 000 from funds donated by a German NGO. The funds were...

LOCAL NEWS

Following a miscommunication over the rent for their shared flat, a woman from HARARE collaborated with a friend to assault her mother with a...

LOCAL NEWS

Chairperson of Budiriro 2 Housing Pay Scheme, Robert Garikayi Jonhera, is wanted by police for defrauding home-seekers by selling them stands on land reserved...

Celeb Gossip

Archford Gutu is now STRANDED in Dubai and pleading for help to sort out the mess, which he created. And, that is not the...