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Yellen: It Is “Virtually Impossible” To Avoid Oil Market Shocks

The United States is involved in "extremely active" discussions with European countries aimed at finding more ways to limit Russian oil revenues, U.S. Treasury Secretary Janet Yellen said.

U.S. officials aim to keep Russian oil flowing into the global market to hold down prices and avoid a spike that could cause a worldwide recession, Yellen said. "But absolutely the objective is to limit the revenue going to Russia," she told a Senate committee on June 7.

There are different ways to accomplish that, including a possible move by purchasers of the oil to band together and cap the prices they pay to Moscow, she said.

The United States last week applaud the European Union’s decision to scale back Russian oil imports by more than two-thirds. The decision was part of a sixth package of sanctions implemented by the EU against Russia over its war against Ukraine.

EU officials believe the bloc's move will force down the price Moscow can ask for its crude and reduce the amount of crude Moscow will sell abroad.

In her testimony to the Senate Finance Committee, Yellen said U.S. oil producers failed to anticipate higher demand and an increase in prices as the COVID-19 pandemic eases, but they now have incentives to increase production.

She added that it is "virtually impossible" for the United States to insulate itself from oil market shocks such as those caused by Russia's invasion of Ukraine, so it is important to shift toward renewable energy sources.

The U.S. treasury secretary also said the United States faces "unacceptable levels of inflation" and “headwinds” associated with disruptions caused by the pandemic’s effect on supply chains “and the effects of supply side disturbances to oil and food markets resulting from Russia’s war in Ukraine."

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