Oil Price Dips Below $80, US Increases Pressure

The previous price cap did not achieve the expected results, so Western countries decided to impose further sanctions and restrictions on Russia's energy sector.

Currently, the G7 has essentially agreed to cap the price of diesel fuel exported by Russia at no more than $110 per barrel. The final price has not yet been determined, but it is believed to be between $100 and $100.

What kind of results can Western countries achieve this time?

01

It has been nearly a year since the conflict broke out, and multiple rounds of sanctions against Russia have been implemented.

The most recent one began last December, with a price cap on Russian crude oil exports. At that time, the price cap set a maximum limit of $60. If the price of Russian crude oil exports exceeded $60, they would not be allowed to use insurance and shipping services provided by Western countries.

However, this price cap has been in place for nearly two months, and the effect is not obvious.

Take India as an example. After the conflict, India has been importing more and more crude oil from Russia. Since Russia's Urals crude oil already offers a certain discount when sold to Asia, India's import price is lower than the price cap.

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Especially last year, international crude oil prices were fluctuating and falling, so the price stipulated by the price cap was not significant.

It is clear that the idea of Western countries is to hit Russia's energy export revenue, thereby hitting Russia's economy.However, for Russia, although exporting to Europe is the most convenient, if it cannot export to Europe, it turns to Asia as the main market for sales, and there is no shortage of exports. In addition to India's vigorous purchases, China and Japan have also increased their imports of energy from Russia.

A few days ago, Putin mentioned that Russia's GDP fell by only 2.5% year-on-year in 2022, and I believe this data has surprised the outside world.

Many European countries have experienced a difficult year in 2022 due to inflation and energy crises, with low economic growth or even negative growth. However, it is unexpected that under many restrictions, Russia's economy only fell by 2.5%, and according to current predictions, Russia's economy will show positive growth in 2023.

02

It is clear that having energy resources urgently needed by European countries is the most important.

The recent reports from the International Energy Agency and OPEC point to the same fact that there is still a shortage of crude oil supply.

OPEC believes that China's rapid economic recovery will significantly increase global demand for crude oil.

And the Energy Agency warns that if energy prices continue to rise, it will damage demand.

Since the third quarter of last year, for a long period, the price increase of refined oil in Europe has been much greater than the price increase of crude oil. Now, further capping the price of refined oil exported by Russia may cause oil prices in the European market to rise even higher.

Recently, Europe's inflation has begun to show a slow downward trend, which is a good thing for the European economy.At the same time, the latest GDP data indicates that Europe has not yet experienced a recession.

However, the new price cap is a significant uncertainty and could even become a stumbling block for the European economy.

Perhaps, this time around, the upgraded price cap will be another expense for Europe to bear.