This past Friday, the European Union, G7 countries, and Australia grouped together and committed to setting up a worldwide $60 per barrel price cap on all seaborne crude oil coming from Russia that kicked off on Monday.
The member of the G7 — including Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States — announced the new proposal earlier this current year. A recent statement from the U.S. Treasury Department announced that this new initiative will “maintain the supply of Russian oil to the global market” while cutting down on revenue for the nation, which is currently taking part in an invasion of Ukraine.
“This price cap will benefit directly emerging and developing economies, and it will be adjustable over time so that we can react to market developments,” claimed Ursula von der Leyen, the current President of the European Commission, in a recently released speech.
This cap on price will only allow the maritime services industry, which encompasses a number of sectors such as trade finance and insurance, to offer their services regarding Russian oil which is being sold below the level of $60 per barrel. As the leading global price benchmark for all crude oil being drilled out of the Atlantic Ocean, Brent crude oil is sitting at roughly $83 per barrel as of this past Monday.
An argument came down from the Treasury Department that the level of the price cap is “high enough to maintain a clear economic incentive for Russia to continue selling oil on global markets,” as Russia has “historically accepted” such a rate. In order to toss back the price cap, Russia would have to solely rely upon service providers that are not part of the G7, which are far more expensive and considerably less reliable.
Officials in Russia were heavily shocked at the proposal. Dmitry Peskov, a spokesman for the Kremlin, claimed that the country “won’t accept the price cap” via a release issued to TASS, the government-owned news outlet. As the country’s ambassador to international organizations in Vienna, Mikhail Ulyanov expressed that Europe will just be forced to survive without Russian oil “starting from this year,” issuing a prediction that the European Union would accuse Russia of “using oil as a weapon.”
Officials in Europe have made the argument that Russia is responsible for a precipitous rise in the cost of energy. The country officially paused shipments of natural gas through Nord Stream 1 before the destruction of the pipeline system by still unknown perpetrators. Some commentators have highlighted that a very rapid transition away from fossil fuels throughout European Union nations, which started to utilize its official policy of becoming “a climate-neutral society” by 2050 in order to abide by the European Green Deal, has been the cause of quite a bit of the very unreliable energy supplies.
” Russia keeps on actively manipulating our energy market,” stated con der Leyen this past September, highlighting that natural gas prices have recently spiked almost tenfold. “But Europeans are also coping courageously with this.”