New price cap announced on Russian petroleum products- February 2023
The Price Cap Coalition, consisting of Australia, Canada, Japan US and EU, have announced new price limits on ‘seaborne Russian-origin petroleum products’ to limit Russia’s ability to finance its war efforts and stabilise the global energy and commodities markets. A senior Treasury official announced that “Our intent is not to crash the Russian economy,.. but to make it impossible for the Kremlin to continue paying for their war”. The agreement between the US and allies places a price cap on ‘premium-to-crude’ products like gasoline, diesel and kerosene at US$100/barrel and ‘discount-to-crude’ products like fuel oil at US$45/barrel.
With numerous sanctions and a previous price cap on crude oil (December 2022 – US$60/barrel on crude oil) that resulted in monthly tax revenues from energy sales declining 46% from the month prior, officials are shrugging off reports that forecast Russia’s economy is expected to rebound and may even outpace Germany and UK; quoting Russia “doesn’t function any longer like a normal economy”. At the current pace, Russia’s budget deficit is growing into a point of unrecoverable return as “the war is costing them more money” because the “bravery of the Ukrainian people” was a surprise to them.