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Western governments are in the final stages of preparing for the implementation of a price cap on Russian oil exports, Reuters has reported, noting that the price range for the cap has yet to be set.
According to one unnamed source who spoke to Reuters, the most likely range would be between $63 and $64 per barrel—the historical average price for crude. However, the report also included a warning from the World Bank that for the cap to be effective, developing economies need to be on board.
At the same time, Russia has repeatedly stated it will not sell crude to countries that enforce a price cap on its crude oil. As Bloomberg columnist Julian Lee noted recently, this is a political decision for Russia and it will not change regardless of what level the G7 set the cap at.
The U.S. administration, notably Treasury Secretary Janet Yellen, has argued that the price cap can be set at such a level as to motivate Russia to continue exporting crude oil at a rate sufficient to avoid a global oil squeeze.
Yet Russia’s firm stance on the matter seems to have given them pause. An Indian news outlet tweeted earlier today that the U.S. had been forced to scale back its oil price cap plans in the face of skepticism from the investment world and the likelihood of heightened volatility on oil markets amid still raging inflation.
"The White House and the administration are staying the course on implementing an effective, strong price cap on Russian oil in coordination with the G7 and other partners," National Security Council spokeswoman Adrienne Watson told Reuters in a statement.
"For us, success is going to be not how many countries raise their hand to say 'We endorse what you're doing, we're part of the coalition.' We're not looking for that. What we want to see is that Russian oil continues to flow into the market, and that countries are using the leverage provided by the existence of this cap to bargain lower prices,” Secretary Yellen said.
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.