The price for Russian crude oil under a cap discussed by the G7 should exclude a risk premium resulting from the war in Ukraine, the U.S. Treasury Department said today, adding that the cap should reflect a fair market value.
The G7 agreed to impose a price cap on Russian crude oil exports last Friday, to be enforced by refusing insurance, funding, brokering, and other services for vessels carrying Russian crude unless its price is set at or below the cap that has yet to be finalized.
According to the Treasury Department, the cap should be set above production costs for Russian oil, with historical prices taken into account as well. An assistant secretary told Reuters the providers of services listed above would not have to police compliance but could rely on information given by buyers and sellers.
"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," said Elizabeth Rosenberg, U.S. Treasury Assistant Secretary for Terrorist Financing and Financial Crimes at a media briefing for the caps.
In response to the move, Russia said it would stop selling oil to countries enforcing the cap. "We will not supply gas, oil, coal, heating oil - we will not supply anything,” President Vladimir Putin said this week.
Despite the fact that Russia has made its position as clear as possible, talks on the oil price cap continue and the European Commission just proposed another cap: on Russian gas imports into the EU.
Not everyone is on board with that particular proposal. Germany is skeptical of its success and Hungary outright warned today that it would lead to a cut-off in Russian gas deliveries to Europe.
This would go against European interests, Hungary’s Foreign Minister, Peter Szijjarto, said today, as quoted by Reuters, ahead of a meeting of European energy ministers to discuss ways out of the crisis.
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.