Experts Disagree on Effects of Russian Oil Price Caps
Experts disagreed on the effectiveness of the Russian oil price cap during a Feb. 13 panel discussion hosted by the Atlantic Council.
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The price caps, implemented in December for crude oil (see 2212050014) and earlier this month for other petroleum products (see 2302060070), were "very well telegraphed," said Daniel Tannebaum, partner at Oliver Wyman and an Atlantic Council nonresident senior fellow. He also said companies were initially worried about "how much diligence [would be] enough" following the announcement of the price cap last summer (see 2211300023). However, he praised the safe harbor structure built into the caps, saying that as guidance was released (see 2211230047), he noticed less concern from insurance companies, financing firms and others.
"Russia is not the most sanctioned country in the world," Tannebaum said, although he added that companies are still "evaluating" risk. "There are still a lot of sectors with permissible trade," including the energy sector, he said.
Not every panelist was as positive. "I am still wondering how the enforcement of the oil price cap will actually work," said Ellen Wald, president of Transversal Consulting. The primary Russian oil blend, Ural, was already trading below the $60 per barrel cap when the price cap went into effect, she said.
She predicted that "losers" under the cap will be areas of the U.S. and Europe that have had difficult times procuring specialty products, such as diesel fuel in the northeastern U.S. The winners, Wald said, are Asian refineries getting crude oil at "huge discounts" and refining that oil into products that are then resold to Western countries at the market rate.
Wald, who also is a nonresident senior fellow with the Atlantic Council, also said the cap has likely shrunk the diversity of the Russian energy sector even though it's still turning a profit. Russian oil products have become reliant on far fewer customers, she said, putting the sector "at the mercy of Chinese and Indian [buyers]."