On August 3, 2023, the US Acting Assistant Secretary for Economic Policy, Eric Van Nostrand, delivered remarks assessing the impact of the price cap on the Russian oil since its implementation on December 5, 2022. According to Nostrand, before the price cap policy was implemented, the price of Russian oil was steadily increasing after the invasion of Ukraine. Russian oil prices had quickly surpassed $100 per barrel in early 2022, while energy market analysts were predicting that Brent prices could rise above $150 per barrel by December 2022. The increased prices were disproportionately impacting lower-income countries who were forced to spend a greater share of their GDP on energy imports.
According to Nostrand, because of the implementation of the price cap for Russian oil in December 2022, Brent prices did not reach $150 per barrel, and the global oil markets stabilized. More importantly, Nostrand was confident that the price cap was achieving the twin goals of restricting Russian revenues and keeping energy markets stable as evidenced by data and messaging out of Russia. According to a Russian Ministry of Finance report, Russian government oil revenues for the first part of 2023 were nearly 50 percent lower than the previous year. Nostrand also stated that senior Russian officials “have publicly lamented the impacts of the price cap, and the Kremlin has been forced to re-evaluate its tax system to squeeze more money out of oil exporters.” The average price for Russian Urals also continues to hover around $60 per barrel, and, while energy market analysts predicted that the global price of oil would increase in the months following the price cap for various reasons, the price cap continues to limit Russian revenues. According to Nostrand, the price cap has provided non-Coalition buyers with much needed leverage to negotiate prices down and resulted in persistent declines in Russian revenue even as Russian crude oil export volumes remain above 2021 average levels.
Nostrand also reported that, since the price cap’s implementation, the stability of the global oil market has reduced global inflationary pressures around the world. The US, in particular, has seen energy prices fall by nearly 17 percent, and energy prices in the EU have fallen 5 percent compared to last year.
The price cap policy was implemented on December 5, 2023 by Price Cap Coalition partners – made up of G7 partners, the EU and Australia – to cap the price of Russia-origin crude oil at $60 per barrel. Because of the policy, companies that engage in the maritime shipment of Russian oil can only use coalition service providers if the Russian oil has been purchased at or below the $60 per barrel cap. In February 2023, the coalition imposed two additional price caps on seaborne Russian refined products – a $45 per barrel cap on discount-to-crude products (i.e. fuel oil) and a $100 per barrel cap on premium-to-crud- products (i.e. Diesel).