The Great “Russian Oil Price Cap” Charade

For those unaware, the EU and other Western nations have a December 5th deadline for implementing a cap on the price of oil purchased from Russia. The West has come to the conclusion that they cannot live without Russian hydrocarbons, but they need to appear to be doing something to limit the amount of money flowing East. Thus the Russian Oil Price Cap dog and pony show was born.

Supposedly, the price would be set high enough for Russia to have an incentive to continue selling fuel to the West, but low enough that the profits from these sales would be massively reduced for Russia, a supposed win-win for the West.

However, to make such a scheme function in a manner that actually hurts Russia, they’d need China and India to play along, and well…, that ship has sailed 🤣.

Currently, the market price of a barrel of oil is $83, for example, and Russian oil already sells at a discounted price of approximately $60-70 per barrel in Asia, due to the current sanctions. The proposed price cap will most likely be around $60-70 per barrel. For perspective, Russian oil companies can profitably sell oil at any price above $30 a barrel, and Russia can balance its budget at prices above $50.

You can already see the Western leadership doesn’t believe in its own policy. In addition to the price being set at basically what China is currently buying oil, the proposed rules wouldn’t apply to oil sent via pipeline over land. This is an abysmal failure when it hasn’t even started…

Why is this such a dud of an idea? As mentioned above, without Asia joining the price cap regime, Putin can simply call their bluff, and refuse to sell fuel to the West, and they know it. The business lobby in the West would also never allow a policy that actually reduced the flow of hydrocarbons, and the people are already suffering the worst inflation scene in generations. BUT they need to look like they’re doing something, so here we are.

-Zin

Edit: I’m just now reading that Russian crude already sells at $52 per barrel in the Urals, so the price “cap” would actually be $10 higher 🤣

It’s obvious that this policy is really about cleaning up the appearance of what’s already happening, not about any new attack on Russian finances.

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