G7 caps the prices of Russian oil amidst war

G7 sets a price cap on Russian oil, $60 a barrel. The goal is to cut off profit margins for Russia without disturbing the global order of supplies. On the other hand, Volodymyr Zelensky (Ukraine’s President) commented on the step, saying it’s a “weak cap”.

G7 is a group of seven large economies, namely France, Italy, Canada, Japan, the UK, Germany, and the United States. As the winter approaches, western countries are suffering hardship due to the Russian-Ukraine war.

The oil prices are off the roof; Brent crude is at $86 a barrel with a 0.6% rise. The G7 put a cap of $60 on Russian oil, whereas Russia refuses to accept the terms. Opec+ is still holding its production rates to what they are. The aftermath is raising oil prices beyond expectations.

Putting a cap is a term used for restrictions. It means that Russia can transport Russian oil using EU or G7 vessels only if Russia sells it for under $60 a barrel. As most of the transportation comes under G7 and EU, it can make it difficult for Russia to sell oil.

Opec+ is a group of 23 oil-producing countries; they together decide the rate of oil production per quarter. And according to the latest reports, Opec+ announced not to increase production rates.

Furthermore, major states in China are removing the covid restrictions, further fueling the shortage of oil. Experts predict a rise in oil prices even more than what we have seen so far.

Zelensky says that the cap on Russian oil is weak and isn’t enough to stop Russia. Certainly, the restrictions will take their toll, but it’s enough to achieve the prerequisite goals. Even after the EU stops buying oil from Russia, markets in India and China continue to buy oil from Russia.

Oil prices continue to rise as the winter approaches. Russia is the second-largest oil producer and accounts for one-third of European needs. It all depends on how long each side will persist.

Credits: BBC