G7 leaders have been cogitating a cap on the price of Russian oil as a mechanism of driving down Russia’s energy revenues without causing a surge in global oil markets. Ehsan Khoman, Head of Emerging Markets Research (EMEA), believes that theoretically, such a price cap – if fully and successfully realised – would permit Russian oil flows while concurrently achieving Europe’s strategy of limiting Russian energy receipts.
Practically, however, he suggests that there are no guarantees that Russia would agree to ship its oil at capped prices – particularly if the cap is close to production costs.
Such retaliatory action runs the risk of elevating global energy prices, fanning the flames of global inflation and worsening the already acute cost-of-living crisis.
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