DISINFO: The US tries to regain its influence through the oil price cap
SUMMARY
The American promotion of a price cap on Russian oil is an attempt to regain the former US influence on the global oil market. Due to the problems in the American shale industry, the current potential of shale oil production is close to exhaustion. Having lost this mechanism, the US is now proposing to control Russian oil prices. The USA has far-reaching calculations here – the Western countries are trying to regain control over the market, which they lost in the early 1970s when OPEC operated on a full-scale basis. That is why OPEC+ supports Russia in its decisions on the oil agreement: the price cap mechanism imposed against Russia could turn into a common tool. Often, the consumer dictates prices when supply exceeds demand. The main problem with the price cap mechanism is it is artificial, not economic in character.
RESPONSE
This narrative is part of the recurring disinformation campaign around the energy sector and sanctions on Russia. The aim of these narratives is to undermine and denigrate Western sanctions on Russia.
The price cap for Russian oil, introduced in late 2022, cannot be seen as a violation of market principles and it was initiated by G7 states and supported by the EU as an additional sanction for Russia’s unprovoked aggression against Ukraine. Sanctions against individuals or political regimes have always existed alongside market dynamics to control harmful practices like corruption, terrorism, illegal warfare etc.
As noted in the Council of the EU's press release: The price cap on Russian oil will limit price surges driven by extraordinary market conditions and drastically reduce the revenues Russia has earned from oil after it unleashed its illegal war of aggression against Ukraine. It will also serve to stabilize global energy prices while mitigating adverse consequences on energy supply to third countries.
The price cap on Russian oil is a novel tool that the energy market has not seen in recent years and this could give a period of uncertainty. However, the impact is expected not to be so critical. According to the New York Times, the processes around the price cap are "not expected to have a sudden impact on oil supplies for Europe, because the regulation has been in the works for months and so traders and shippers have had time to adjust. In particular, energy companies have already begun buying more oil from the United States, Brazil, Guyana and the Middle East. The EU is also giving exemptions to some countries like Hungary, whose energy needs depend on flows of Russian crude by pipeline, to quell their objections to the sanctions".
The claims in the article seek to distract attention away from the fact that the price cap is the biggest problem for Russia, not Europe. It is predicted that Russian oil output is set to fall by 1.4 million barrels per day in 2023. Chatham House provides a prognosis that one particularly important point when it comes to oil, energy, and commodity markets has been how market forces have mitigated Russia’s own efforts to use the energy card against the West, particularly against Europe.
See similar cases that Sanctions don't affect the Russian economy; the New York Times reports that Russia is barely affected by sanctions; sanctions against Russia worsen the economic crisis in the West; The EU lost more from sanctions than Russia; European sanctions against Russia do not work.