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Gasoline prices in the United States could spike this winter as an embargo on Russian oil imports comes into effect in the European Union, Treasury Secretary Janet Yellen has warned.
Speaking to CNN, Yellen said that “Well, it’s a risk. And it’s a risk that we’re working on the price cap to try to address.”
Yellen was the first official to propose a price cap on Russian oil exports as a means of reducing Russia’s revenues from energy exports that, according to Washington and other western capitals, fund what Moscow calls its special military operation in Ukraine.
Earlier this month, the G7 agreed to impose a price cap on Russian oil exports by banning cargo services such as transport, insurance, and financing for cargos sold above a certain price that has yet to be set by the group.
The European Union agreed on an embargo earlier this year on Russian oil and fuels, to come into effect in December. This means that Europe would need to source its oil from elsewhere, meaning greater demand for a smaller pool of available oil.
Russia has said it will not export either oil or gas to countries that participate in any price cap agreements.
“This winter, the European Union will cease, for the most part, buying Russian oil. And, in addition, they will ban the provision of services that enable Russia to ship oil by tanker. And it is possible that that could cause a spike in oil prices,” the U.S. Treasury Secretary told CNN.
“Our price cap proposal is designed to both lower Russian revenues that they use to support their economy and fight this illegal war, while also maintaining Russian oil supplies that will help to hold down global oil prices. So I believe this is something that can be essential, and it’s something that we’re trying to put in place to avoid a future spike in oil prices.”
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.