The G7 countries – the U.S., U.K., Canada, France, Germany, Italy and Japan – have provisionally agreed to impose a price cap on Russian oil. The cap will apply to crude oil from December 5th and refined products from February 5th.
A major reason why Western sanctions haven’t turned the rouble to “rubble”, as Joe Biden said they would, is that Russia has been earning huge revenues in the oil and gas markets – thanks to elevated prices of those commodities. Western countries want to put a stop to this; hence the oil price cap.
But why a price cap? Why not just threaten sanctions against any country that buys Russian oil? There are two reasons. First, other countries – especially China – wouldn’t stand for this. Second, Western countries don’t actually want Russian oil to leave the market. They want it to keep flowing – just at a lower price.
Why is that? If Russian oil left the market, the price of oil would skyrocket. Since the end of the Second World War, the inflation-adjusted oil price has never exceeded $170 per barrel. But if Russian oil was no longer available, it could reach more than twice that level – bringing the world economy to a standstill.
The logic behind the price cap is that the oil price remains relatively stable, but Russia ceases to earn outsize profits. So how will it work?
Western countries actually do have some leverage over Russia when it comes to oil. Much of the shipping and insurance services that facilitate the distribution of Russian oil is based in Europe (shipping in Greece; insurance in London). The plan is to announce that such services will only be available for shipments where the agreed price is below the price cap.
Suppose the market price is $100, and the price cap is set at $50. India proposes to buy a shipment of oil from Russia. Western shipping and insurance services will only be available if India agrees to pay $50 per barrel or less.
Russia has already warned it won’t sell oil to any country that imposes a price cap. But the West is hoping Russia will be forced to comply. After all, shutting down oil wells is expensive and risks scuppering future production.
Now, Russia did manage to cut production during Covid when demand for oil cratered. But proponents of the price cap say it won’t be so easy this time, as Western oil companies have gone and taken their expertise with them. Sceptics, however, say that Russia knows how to manage its own oil industry.
Successfully cutting production would presumably hurt Russia, but by less than you might think. Remember there’s a quantity effect and a price effect. Russia would be selling less oil, but would be earning more money per barrel.
Another possibility is that major buyers like China and India refuse to go along with the price cap. So far, India’s petroleum minister has said he will “look carefully” at the proposal, while noting he has “moral duty” to Indian consumers – not the West. Meanwhile, China’s Foreign Ministry has called for “dialogue and consultation”, which has been taken as lack of support. (That China would oppose the price cap is hardly surprising.)
So how will Russia’s customers get their oil if Western shipping and insurances services aren’t available? Some people claim that tankers can be rerouted from elsewhere, and that Russian or Asian companies can provide insurance. Others claim there’s no enforcement mechanism. What’s to stop a customer paying the price cap, and then making up the difference with a side payment?
Indeed, if the price cap falls well below the market price – which is the whole point – won’t every buyer in the market want Russian oil? Why pay $100 per barrel for Saudi oil, when you can get Russian oil for $50? Buyers will then bid up side payments until the ‘true’ price of Russian oil is close to the market price.
The best-case scenario for the West is that Russia complies with the price cap and side-payments are small.
What seems more likely, though, is some combination of production cuts and alternative distribution channels – which will hurt both Russia and the West. Russia will earn less revenue, and Westerners will pay more for their oil (at a time when Europeans are paying vastly more for their gas).
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“Only in my hometown of Brighton and Hove…”
Would that it were only possible in Brighton and Hove.
Legal professionals are everywhere manifesting their make-believe virtual worlds through the manipulation of language and expert whataboutery. If a corporation can be a person, why can’t a man be women?
An excellent vehicle by which to destroy a country.
Sorry but this is really a bit silly. The law regards companies as legal persons so that they can be legally liable and be sued. If you wanted to sue a company you would be glad of that.
This makes my blood boil. Who really has the welfare of children at the heart of their thinking? Children’s parents or children’s state service providers? The latter are not only incentivised by woke dogma, but also by their very real need to feel good about themselves. Feel good about themselves by destroying the lives of innocent children. I couldn’t despise these creatures more; they are evil. I’m not sure what I would do if I had young children being indoctrinated like this by this filth. Nothing good.
Labour are communists in disguise. They are showing their true communist, totalitarian colours in Brighton and other places they control. A coming Labour government will have people in gulags: cancellation, firing from jobs and then polizei stasi investigating your thinking will become the norm. We are heading for a very dark place in this country. The socialists are coming for you and your thoughts and freedom. Hopefully it will cause civil unrest and they will be destroyed.
Labour are vile. A clear and present danger to children and the people of this country. How in God’s name are people really favouring this shower of communist dictators??.our people have become mad. They deserve their prison which is coming fast.
The really simple explantion for events like this, especially the transition from Green -> Labour without any change of the Against the people united we stand! political agenda is that there’s money to be had by acting in this way. So-called trans activists are adults seeking to exploit vulnerable, eg, depressive or autistic, children, for their own benefit. And council sold the children to them based on being legally entitled to imprison them in so-called school buildings for most of their time which have thus found new and much more exciting and profitable purpose than teaching them boring stuff like history or maths.
The methods of these people may resemble those of Marxists. But they’re certainly not planning to uplift the working class to decent standards of living by fighting against their exploitative employers.
Forget the gender nonsense and concentrate on the real issues that these children will face .
The majority of these schoolchildren will no longer have their birth father living in their home by the time they are 7years old and there is NO money or organisations out there to help them understand and survive these changes.
There is something particularly evil about this assault on the mental health and emotional integrity of young children. Frankly I can understand it when parents faced with this situation take the law into their own hands.
TLDR
I did read it. But the article could have benefitted from some editorial shortening.
I wonder why nobody is investigating why so many children have these transgender issues, is it environmental toxins?