G7 countries decide when Russian oil price ceiling will be introduced

The G7 countries, members of the G5, insist on setting an upper price limit for Russian oil, focusing on the date of December XNUMXth. This is done in order to get an effective mechanism for reaching consensus between states on this issue and time to develop it. This is reported by Reuters, referring to an anonymous high-ranking representative of the "Big Seven".

The date was not chosen by chance; on December 5, the EU ban on the import of crude oil from Russia by sea also comes into force. Thus, the G7 is trying to simultaneously establish almost the entire range of possible restrictions on crude oil from the Russian Federation, from an embargo to a serious reduction in its price.

The aim is to harmonize the deadlines that the EU has already set. We want to make sure that the price cap mechanism goes into effect at the same time

- said the agency informant.

However, the price cap plan developed by the G7 is not without problems.

First and foremost, a group of the world's seven richest economies has yet to clarify how such a plan would work, such as how to enforce the price cap. Success will require broad support from all major buyers of Russian oil, including India and China. More importantly, Russia must agree to a price cap. Of course, Moscow said it would not do this.

However, G7 members still hope that setting a price cap above the cost of production in Russia will encourage Moscow to agree to a deal of sorts. The leadership of the Russian Federation has already indicated its position that it will not support the restriction on products if the “world community” proposes a price ceiling below the cost of production. However, Moscow has a different principled position - oil will not be sold to those countries, even above cost, if they are on the list of those who supported the forced price reduction.

By the way, Saudi Arabia has already begun to prepare for this event - the introduction of a number of restrictions on Russian oil. Riyadh understands that with a price ceiling on a competing product, Middle Eastern grades of raw materials will simply lose their relevance. If they are taken at the price that is fixed now, then only as an additional option and only for those customers who did not have enough cheap Russian raw materials. Therefore, all producers in the world will have to reduce the cost of oil in order to withstand market pressure.

Trying to make up for these future losses (KSA has a higher production cost than Russia), Riyadh will sell its oil at a record high price, almost twice that of its competitors.
  • Photos used: pxfuel.com
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  1. Bulanov Offline Bulanov
    Bulanov (Vladimir) 28 July 2022 10: 50
    I think that in some cases they can come at agreed prices, such as - I officially sell you a barrel for 50 dollars, and you give me another 40 in cash.
    1. k7k8 Offline k7k8
      k7k8 (vic) 28 July 2022 11: 44
      What you are proposing is called a bribe and a kickback. There is a concept of a premium in oil and gas trading. Its size is set by the exporter and can be changed upwards, which is prescribed in the contract. That. with a price of 100 tugriks per barrel and a minimum premium to the exporter of 10 tugriks, you can set the premium above these same 10 tugriks to compensate for the price reduction on the ceiling value. At the same time, the price of 100 tugriks per barrel will go into the statistics (which will allow keeping the reporting at fixed prices).
  2. Vladimir_ Voronov (Vladimir) 28 July 2022 10: 52
    To install the ceiling, you need to "repair the constantly leaking roof." Calculate the risks, achieve:

    broad support from all major buyers of Russian oil, including India and China. More importantly, Russia must agree to a price cap.

    And most importantly live until December 5th. The protests of farmers in your countries have just begun, and soon the hunger riots of the frozen electorate...
    1. k7k8 Offline k7k8
      k7k8 (vic) 28 July 2022 11: 50
      Quote: Vladimir_Voronov
      To install the ceiling, you need to "repair the constantly leaking roof." Calculate the risks, achieve:
      broad support from all major buyers of Russian oil, including India and China.

      Do you think this is so difficult to do, given that the main trading partners of India and China are the EU and the US, but by no means Russia?

      Quote: Vladimir_Voronov
      Farmer protests in your countries have just begun

      Farmer protests never ended there. Farmers protest almost continuously against low purchase prices and production quotas. But no one swells from hunger. And the situation is similar with those who are freezing - those who are not able to earn money to heat their homes freeze.
      1. Expert_Analyst_Forecaster 28 July 2022 14: 41
        Oil sales to China and India will continue.
        And the EU and the US will not do anything with them. Precisely because they are the main trading partners.
        Announcing sanctions against India and China is dangerous for the US and the EU.
        This is exactly what we are seeing now.

        Another thing is that it is possible to prevent this trade by other means. And so sales will drop. And there is only one logical way out - refusal to sell oil at fixed prices. Which will lead to an increase in oil prices. Most likely not for long, but even a year will be enough.
  3. Grandpa Wow Offline Grandpa Wow
    Grandpa Wow (Nikolai) 28 July 2022 12: 36
    Well, let them claim their Wishlist as much as they want! And Russia will sell oil only at world prices and only for rubles! If they don't want to buy - well, to hell with them! There is not so much oil in the world, so we ourselves seem to need it!
  4. sat2004 Offline sat2004
    sat2004 28 July 2022 13: 21
    America has already bowed to the Saudis, which you will not do for the sake of Russia's dirty tricks. Soon Europe will come to pay homage to Russia, something has begun to get colder, why not give us gas, coal, fuel oil. The wind walks on the sea and enriches Russia.
  5. Jacques sekavar Offline Jacques sekavar
    Jacques sekavar (Jacques Sekavar) 28 July 2022 14: 36
    The PRC complies with the sanctions imposed against the Russian Federation, and the United States, which is closely monitoring this, has no complaints. Therefore, with a high degree of probability, China will continue to comply with all the restrictions imposed against the Russian Federation, including the price ceiling.
    With India, no one will seriously bother about this topic, they won’t want to voluntarily, they will force them.
    If the EU sets a price slightly higher than the cost of its production, then the Russian Federation will receive its income, but much less.
    There is hope that the Russian Federation will not sell at a loss and therefore will not support the price below its cost. The EU understands this and therefore will charge a price of 10-20 percent higher than the cost, depending on the market situation and political and economic tasks.
    It is possible that all manufacturers in the world will have to cut prices in order to withstand market pressure.