G7 Price Cap on Russian Oil Doomed to Fail

On Friday, US-dominated G7 finance ministers announced the following:

“We confirm our joint political intention to finalize and implement a comprehensive prohibition of services which enable maritime transportation of Russian-origin crude oil and petroleum products globally.”

“The provision of such services would only be allowed if the oil and petroleum products are purchased at or below a (capped) price determined by the broad coalition of countries adhering to and implementing the price cap.”

By customary US pressure, bullying, threats and bribes doomed to fail, G7 ministers “invite all countries to provide input on the price capґs design and to implement this important measure (sic).”

“We seek to establish a broad coalition to maximize effectiveness and urge all countries that still seek to import Russian oil and petroleum products to commit to doing so only at prices at or below the price cap (sic).”

“We reaffirm our own measures to phase out Russian oil and products from our domestic markets and underscore that the price cap measure aims to relieve pressure on global oil prices (sic).”

Attempting to cap the price of Russian oil by dominant Biden regime hardliners and their G7 vassal counterparts is a harebrained scheme doomed to fail.

When the notion surfaced weeks earlier, Institute for the Analysis of Global Security’s Gal Luft said the following:

It’s…a ridiculous idea in my view,” adding:

“That’s not how the oil market works.”

“This is a very sophisticated market.” 

“You cannot force the prices down” artificially. It ignores the fact that oil is a fungible (interchangeable) commodity.”

“Europeans and Americans that are talking about $40 a barrel, what they’re going to get is $140 a barrel.”

“You cannot trick the laws of supply and demand, and you cannot defy the laws of gravity when it comes to a fungible commodity.”

And this reality check from oil analyst, Neil Atkinson, saying:

“Something like this could only work if you get all of the key producers and crucially all of the key consumers working together and then finding some way of enforcing whatever plan you come up with.”

That clearly won’t happen.

Energy Aspects analyst Amirita Sen agreed, saying:

Price cap consensus “is not going to work in practice,” adding:

Believing that world community nations will back the US-dominated G7 scheme is “the biggest misconception” on an issue as important as energy security.

In July, JP Morgan Chase analysts warned that if Russia cuts crude output in response to a Western price cap, the price could rise to $190 dollars a barrel with a 3 million-barrel daily cut.

It could rise “stratospheric(ally)” to $380 a barrel if 5 million barrels are kept off the market.

Global oil market tightness “is on Russia’s side.”

Its ruling authorities will likely respond by creating an artificial market shortage.

In response to the G7 announcement, Russia’s Security Council Deputy Chairman, Dmitry Medvedev, said the following:

Nations going along with a price cap on Russian oil won’t get any, nor “Russian gas.”

Kremlin spokesman, Dmitry Peskov, stressed that Russia will not deliver oil or oil products to countries observing an illegal cap.

And this from Russian Deputy Prime Minister, Alexander Novak, saying:

Russian oil will be delivered “in alternative directions, to those countries that operate according to market conditions.”

And this from Russia’s US embassy, saying:

Moscow “will not sell oil at a loss.”

If an oil cap is imposed, the move will “threaten to further collapse the oil market.”

Russia is a leading oil producer with the world’s 2nd largest natural gas reserves.

Besides oil and gas, Russia is rich in coal, iron ore, timber, gold, silver,  diamonds, titanium, copper, rare earths, aluminum, uranium, copper, palladium, platinum, nickel, and many other commodities — worth an estimated $75 trillion.

Its military is also armed with super-weapons for self-protection that exceed the best in the West — developed at a small fraction of what hegemon USA spends for its weapons et al.

Western and many other nations rely on Russian commodities.

If a G7 price cap is imposed on its oil exports, Russia can and should cut off all nations enforcing it from access to all its commodities.

They’d then have 2 options: let their economies collapse or cry uncle and apologize.

Either way, the harebrained scheme is doomed to fail if implemented.

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