The members of the G7 as well as Australia — collectively known as the “Price Cap Coalition” — recently announced a price cap of $60 per barrel on Russian crude oil and petroleum products to be implemented by each coalition member. This follows an earlier, similar agreement by the 27 member states of the European Union (EU) and will be implemented as of Dec. 5, 2022, for crude and Feb. 5, 2023, for refined petroleum products.
“The EU agreement on an oil price cap, coordinated with G7 and others, will reduce Russia’s revenues significantly. It will help us stabilise global energy prices, benefitting emerging economies around the world,” European Commission President Ursula von der Leyen tweeted Dec. 2.
The Treasury Department detailed in a Dec. 2 announcement that the price cap aims at maintaining the supply of Russian oil to the global market, while also reducing Russia’s profits.
It added that the cap will be “of particular benefit to emerging markets and low-income economies that are highly exposed to rising energy prices.”
“Russia’s unconscionable war in Ukraine has disrupted energy markets and caused widespread economic hardship, from natural gas shortages in Europe to elevated oil prices around the globe. The rise in energy prices has proven especially harmful to those economies with heightened vulnerability to energy price shocks,” the Treasury Department declared in the announcement.
Also on Dec. 2, Secretary of State Anthony Blinken tweeted: “We welcome the work by the EU to stabilize energy prices while reducing Russia’s revenue from energy exports, crippling its ability to finance its unjustified war in Ukraine. The G7, EU, and Australia have now jointly set a cap on the price of seaborne Russian oil.”
The EU indicated in a Dec. 3 statement that the price cap had been specifically designed to further reduce Russia’s revenues while keeping global energy markets stable through continued supplies.
“It will therefore also help address inflation and keep energy costs stable at a time when high costs — particularly elevated fuel prices — are a great concern in the EU and across the globe,” the statement read, in part.
Some Experts Suggest Price Gouging To Blame for Rising Gas Prices
Some experts, however, believe that price gouging is to blame for higher gas prices — and that even if the G7 price cap were effective in getting oil prices to fall, the U.S. oil industry would likely not pass the full savings on to consumers.
“If this year has shown us anything, it’s shown us the unrelenting greed and willingness of wealthy oil executives to price gouge American consumers independent of oil costs. When oil prices fall, Big Oil opts to keep consumer gas prices higher to further line the pockets of its wealthy shareholders,” said Chris Marshall, research manager of energy and environment at Accountable US. “… Even after the industry raked in $343 billion profits over the last three quarters of this year. Their greed knows no bounds.”
Finally, as The New York Times reported, on Dec. 4, Russian Deputy Prime Minister Alexander Novak said the price cap would have a negative impact on the global market and would contradict World Trade Organization rules. Further, he said that the country would only sell oil and oil products “to countries that will work with us on market conditions, even if we would have to lower production.”
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