Russian Oil Price Cap Could Be Biden’s Biggest Energy Folly Yet

Russian Oil Price Cap Could Be Biden’s Biggest Energy Folly Yet

Share to Linkedin There are two likely consequences of the price cap on Russian oil exports that G7 leaders agreed to in early September – and neither is good for the policy's architects. The idea behind the price cap is to expand the reach of sanctions on Russia to third countries, thereby limiting the windfall the Kremlin is receiving from higher oil prices while also lessening the impact on prices in sanctioning countries. But there are flaws in this thinking. First, big buyers of Russian oil like China and India will likely ignore or evade the cap and keep providing vital funding for Russia's war machine with their purchases. Second, the price cap creates a considerable disruption to Russian oil supply that will send global prices skyrocketing, keeping Russian oil income buoyant while punishing the global economy. At a minimum, a cap injects greater supply risk into oil markets that will ultimately be reflected in oil prices. Although crude is trading at 9-month lows due to concerns about a global recession, consumers shouldn't get comfortable with current price levels. The price cap is an example of Western policymakers trying to have their cake and eat it, too, when dealing with