By Irina Slav
- The oil price cap that came into effect last week was designed to keep Russian oil flowing into international markets while reducing Russia’s revenues.
- While the price cap may have made sense on paper, it has proven to be confusing for oil traders who very rarely trade crude at fixed prices.
- To add to these worries for traders, Turkey is continuing to ask for proof of insurance for tankers passing through the Bosphorus and Dardanelles, further disrupting supply.
Last week saw the start of a price cap mechanism conceived of by the U.S. and embraced by the G7 and the European Union, aimed at keeping Russian oil flowing into international markets but reducing Russia’s revenue from that oil.
The price cap came into effect in the company of an almost complete embargo on Russian oil imports into the European Union, giving traders in Europe at least a theoretical opportunity to buy and sell Russian crude. But the authors of the cap did not think about oil traders.
To begin with, about half of the G7, including the U.S., Canada, and the UK, already have a ban on Russian oil imports, so the cap will make no difference to their supply of foreign oil. Japan, although
Crude Oil