HomeMediaLatest News"A lot of noise, but little «exhaust»"

"A lot of noise, but little «exhaust»"

22 November 2022

Salikhov Marcel R. President, Principal Director on Economic Studies, Head of the Economic Department

Marcel Salikhov, President of the Institute for Energy and Finance, commented to the Ekonomika Segodnya internet magazine on the introduction of a mechanism for limiting Russian oil prices.

Washington has decided on the ceiling for oil prices, it is proposed to limit the cost of energy from Russia and introduce restrictions for partners of the Russian Federation. For now, a $60-$70 per barrel price ceiling is just a proposed measure, and White House officials intend to discuss the marginal cost of Russian hydrocarbons with G7 ambassadors at a November 23 meeting.

The sanction will not affect the oil trade in any way, and is more of a technical nature, Marcel Salikhov says.

“The $60-$70 per barrel range has little effect because current oil prices are below $70 per barrel. This is close to the real price level, thus a kind of “light scenario” is being implemented,” the expert said.

The essence of the problem is not the size of the price ceiling, but who will eventually join it, the economist believes.

“The main question is who will support the price ceiling. The fact is that the EU countries, the US and the UK have already imposed an embargo on Russian oil supplies. Officially, oil from Russia will not be delivered to these countries. The key issue concerns the only country that occupies a modest and not very clear position - Japan,” Marcel Salikhov commented.

Tokyo depends on imported energy resources and supplies oil, including from Russia. As for other countries, they are already imposing an embargo even without a price ceiling.

The risk of secondary sanctions may scare away some buyers, it is quite difficult to predict the situation at the moment, the source said.

The market froze in anticipation of the results of the G7 meeting. Everyone is concerned about whether Western countries will impose sanctions on the largest oil refiners from India or other countries that actively import oil from Russia.

“It’s like this with the price ceiling: a lot of noise, little “exhaust”. Most of the questions will just be related to the embargo. This is a much more complicated story for both Russia and the European Union,” the expert summed up.

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