The Effect of Russian Oil Price Cap

A few days ago, the United States and Europe announced they would not purchase any Russian oil shipments that cost more than $60 per barrel.

The goal is to cut Putin's earnings and weaken the "Russian military machine."

In this article, I discuss whether or not these specific choices are beneficial. Is this only a pointless political maneuver, or something more substantial?

The limit, which was set at sixty dollars by the G7 and the EU, is legally binding. If 60, then why that number precisely?

Price estimates for Russian crude oil range from $20 to $45 per barrel. Therefore, Putin is willing to sell at the current price of $60.

President Zelensky was irate because oil from Russia was being sold for close to this amount already. How exactly will this verdict be upheld?

Without insurance, oil tankers cannot move from one port to another. As 95% of oil tanker insurance companies are based in Britain and Europe, this prevents them from moving.

At $60 per barrel, the Russian oil price is too high to be insured for any tanker.

But so far, more needs to be done because oil prices are so low. In response, Russia has said that these decisions are wrong and confirmed that it wants to limit production, which will raise prices everywhere.

We'll know if Russia is serious about its confirmed production cuts if prices start to increase. Russia will also make an effort to work with international insurance providers that cover oil tankers.

As a result of Russia's move, non-compliant countries like India and China will have a greater chance of negotiating lower oil prices with the country, as fewer countries would buy Russian oil if the government kept its commitment. And the ones who can hold their breath the longest will win because if prices start to increase and Russia decreases output, the West will suffer.

In addition, Kremlin spokesman Dmitry Peskov said that Russia would not sell oil to anyone at a price below the price ceiling, adding that Russia's reaction to the sanctions and price ceiling is nearly complete and will be revealed soon.