The global oil market will still need Russian oil to flow even with the planned price cap, Fatih Birol, the Executive Director of the International Energy Agency (IEA), said on Tuesday.
The price cap proposed and pushed by the G7 with the purpose of allowing Russian oil to continue flowing, but at lower than market prices, still has many details to be hashed out, Birol said at the Singapore International Energy Week, as carried by Reuters.
Last month, the G7 group of the most industrialized nations agreed to finalize and implement a price cap on Russian oil, aiming to reduce Vladimir Putin’s oil revenues for his war chest. The G7 will ban maritime transportation services for Russian oil unless the products are purchased at or below a certain price cap.
European Union ambassadors also endorsed the price cap after reaching an agreement earlier this month to impose a new package of sanctions on Russia, including banning maritime transportation for Russian oil to third-party countries unless the oil is sold below or at a certain price cap.
Many analysts and experts doubt that the price cap would serve its dual purpose of cutting revenues for Putin while keeping Russian oil flowing because top importers China and India haven’t signed onto the price cap, and because Putin could simply make good on his promise to halt all energy supply—including crude, fuels, natural gas, and coal—to the countries that sign up to cap the price of Russian oil.
Last week, a U.S. Treasury official and industry representatives admitted to Reuters that Russia could largely evade the price cap because it would likely have access to enough own tankers and transport and insurance services to ship its oil. There have been estimates that Russia could continue to ship 80-90% of its oil outside the price cap regime, and those estimates “are not unreasonable,” the unnamed U.S. official told Reuters.