The European Union (EU) is trying to reign in prices on Russian oil—and Russia cannot price them out.
Key Details
- The European Union is considering putting a price cap on Russian oil making the barrels cost between $65 and $70.
- The cap would not let oil be shipped anywhere in the world unless it was in the agreed upon price range.
- The reason for the cap is to keep Russian oil flowing in order in an attempt to avoid the price spiking while limiting Moscow’s revenues from the oil.
Why it’s news
The EU is considering putting a cap on Russian oil so barrels will not sell for more than $65 to $70 a barrel.
The reason for the cap is to keep Russian oil flowing, but limit the amount of revenue that is going back into the war between Russia and Ukraine.
The range of $65 to $70 a barrel is above the production cost for Russia, but some countries are pushing for the price to be even lower. The official cap price could be announced soon, but it needs to be approved by all member states before being put into place.
Russia is already selling the oil at a discounted price so many think the cap should be lowered in order for Russia to feel the impact.
“Russian oil currently trades at a significant discount compared to Brent, around $65 per barrel,” says Bruegel think tank fellow Simone Tagliapietra. “Should the G-7 price cap for Russian oil be set at a similar level, it wouldn’t do much harm to Russia.”
The EU is also considering adding a grace period for the oil cap so ships carrying oil not sold under the correct prices would not be immediately penalized. The proposed grace period will be for oil loaded before the date the cap should kick in which will be December 5 and unloaded by January 19.
The exact cap price and all details are set to be announced after each member state can come to a decision on the prices.