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Post: The Economist warns of a jump in oil prices due to the Western “ceiling”

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Economist: A ceiling price for Russian oil will cause a deficit and a sharp rise in prices

MOSCOW, December 2 – RIA Novosti. If the European Union imposes an embargo on Russian oil imports by sea and sets a ceiling price, the world may face raw material shortages and price increases. Economist.

The publication recalled that since the beginning of Russia’s special operations in Ukraine, the West has set a goal of minimizing Moscow’s oil and gas revenues without reducing global supply and causing an increase in prices. Later, the EU banned oil tankers from insuring with Russian oil. This measure was supposed to seriously affect exports from the country, but it had a serious drawback.

“If Russian oil does not reach the market, world oil prices could rise sharply, hitting Western consumers,” the article says.

The United States then offered to introduce a ceiling price, the maximum level at which European companies could continue to insure their ships with Russian oil. At the same time, the price bar should be lower than the market, but higher than the cost price: this way, according to the plan, it will be possible to reduce Moscow’s revenue and avoid a deficit.

However, not everything is so smooth. Thus, the Kremlin may refuse to use tankers from countries that comply with the price ceiling, which will reduce oil exports due to the reduction in the number of potential means of transport. This is why the West is trying not to set the maximum price much lower than the market price, which renders the entire plan ineffective, the material notes.

Another question is how much the West can influence the oil market. For some types of insurance services, these countries have de facto monopolies. At the same time, Asian countries, especially China, India and Indonesia, do not want to participate in the sanctions against Russia and may find alternatives to Western insurers.

The Economist warned, “The real harmony of forces in the oil markets will emerge after 5 December. A sharp increase in prices is possible.”

However, the publication predicted that the global oil market would become more flexible and adaptable, and the West’s role in energy would diminish. It also has limitations, including the duration of sanctions and embargoes.

In September, the finance ministers of the G7 countries (UK, Germany, Italy, Canada, USA, France and Japan) confirmed their intention to impose price restrictions on supplies from Russia. On December 2, permanent representatives of EU member states agreed on the level of price limits for Russian oil transported by sea. Ursula von der Leyen, president of the European Commission, stated that the ceiling on the cost of Russian energy supply will be adjustable.

It is planned to impose a limit on oil on December 5, and on petroleum products on February 5, 2023.

Commenting on this initiative, President Vladimir Putin stated that Russia will not supply anything abroad if it goes against its interests.

On the other hand, Deputy Prime Minister Alexander Novak stated that Moscow will not export oil to countries that set ceiling prices neither at $60 per barrel nor at any other cost. For him, such restrictions amount to intervention in market instruments, and Russia will cooperate with consumers who are ready to work in market conditions.

Source: Ria

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