- The US wants the G7 price cap on Russian oil to take historical prices into consideration, per Reuters.
- It should also exclude the risk premium from the Ukraine war, a US Treasury official said.
The US says a G7 price cap on Russian oil should be set at a fair market price that takes historical prices into consideration — which could put it at about $60 a barrel, Reuters reported.
Ministers from the G7 countries — Canada, France, Germany, Italy, Japan, the UK, and the US — agreed last Friday to back a plan to cap the price of Russian crude. The aim is to curb Moscow’s healthy energy revenues, which are helping fund President Vladimir Putin’s war machine.
The allies are now working on determining the level of the price cap, according to US Treasury Department official Elizabeth Rosenberg.
“There are several key data points we are considering and how the prices should ultimately be set, and that includes the marginal cost of production for Russian oil,” Rosenberg said, per Reuters.
“The price cap price should be … in line or consistent with historical prices accepted by the Russian market,” she added.
But it should also exclude any risk premium driven by Moscow’s actions in the Ukraine war, the Treasury official said.
Worries about the risks to global oil supply from the conflict and sanctions around it have pushed oil prices higher this year. In early March, the immediate aftermath of the invasion, Brent crude futures, the global benchmark, soared above $120 a barrel.
The factors outlined by Rosenberg suggest a price limit of about $60 a barrel for Urals crude oil, given it traded at $50-$70 a barrel two years ago, Reuters reported.
Russia’s benchmark crude was changing hands at around $70 at last check Friday. Brent crude was up 1.8% at $90.74, while WTI crude futures, the US benchmark, were up 1.8% at $85.11.
Kremlin officials have warned Russia would cut off energy exports to any country that went along with the oil price cap. Putin further condemned Europe’s plan to move forward with a gas price cap too, saying it was “stupid” and could elevate prices.
Economists estimate Russia’s revenue from its oil and gas sales could hit $285 billion this year as energy prices stay high.