DISINFO: Russian oil price cap violates market pricing
SUMMARY
Russia will respond to Western attempts to set a cap on gas prices. This is a violation of the market process of and an encroachment on it. Any references to a price cap are unacceptable.
RESPONSE
This is a recurring manipulation of the discussions about the energy sector and sanctions on Russia.
In reality, setting a price cap is not a violation of market rules. Russian oil is not ousted from Western markets completely. The price cap is fixed for now but adjustable over time. EU countries agreed to set it at $60 per barrel. The price may be amended in the future to reflect market developments and technical changes. The price cap for Russian oil was initiated by G7 states and supported by the EU as an additional sanction for Russia’s unprovoked aggression against Ukraine. It was noted that:
The price cap on Russian oil will limit price surges driven by extraordinary market conditions and drastically reduce the revenues Russia has earned from oil after it unleashed its illegal war of aggression against Ukraine. It will also serve to stabilise global energy prices while mitigating adverse consequences on energy supply to third countries.
The price cap applies to oils which originate in or are exported from Russia. It comes on top of the EU import ban on Russian seaborne crude oil and petroleum products, and the corresponding bans of other G7 partners. Russian oil output is expected to fall by 1.4 million barrels per day in 2023. Chatham House provides a prognosis that “one particularly important point when it comes to oil, energy, and commodity markets has been how market forces have mitigated Russia’s own efforts to use the energy card against the West, particularly against Europe”.
If the cap causes oil prices to go down as a secondary effect, that would benefit most of the global economy, especially low-income countries, which have suffered the most due to rising energy costs. It was noted by the Council of the EU that:
The price cap on Russian oil will limit price surges driven by extraordinary market conditions and drastically reduce the revenues Russia has earned from oil after it unleashed its illegal war of aggression against Ukraine. It will also serve to stabilise global energy prices while mitigating adverse consequences on energy supply to third countries.
Read more disinformation narratives about the price cap on Russian oil and see also our article Smoke, mirrors and gas: the Kremlin deflects blame for the energy crisis - EUvsDisinfo.