The West wants to set a price cap on the importation of Russian oil

Vladimir Putin at opening of Tuapse Oil Refinery Credit: President of Russia

THE West wants to set a price cap on the importation of Russian oil but no-one can agree on what that price should be.

The invasion of Ukraine has seen energy cost of all sorts soar but because Russia has such huge oil reserves and the West needs oil, it continues to export crude oil, currently at prices which are often lower than Brent.

The problem for the G7, EU and others such as the UK is that if they set the cap to high it won’t actually have any major effect on the Russian economy but if set too low, then Russia could simply restrict production and force world prices up.

Russia still has friends around the world and could simply export its higher priced crude to them and benefit from the increased price.

Whilst the proposed cap is somewhere between $60 and $70 a barrel, the current average price is $85 a barrel for Brent but Russia is selling cheaper than that and it is now reported that Putin is considering passing a new law whereby Russian oil exporters will be banned from supplying any country that signs up for the price cap!

To add to this, Russia is currently purchasing second hand tankers (reportedly 70 so far according to ship broker BRS) in order to get round any ban on Western owned tankers from carrying Russian crude oil.

Effectively, whilst leaders dither, Russia continues in this area at least to ‘rule the roost’.

What is also sometime overlooked is that Russia is the world’s third largest producer of gold and with 2,300 tons in reserve, worth around $55 million per ton, finance is possibly the least of Putin’s worries.

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