- G7 finance ministers are set to meet on Friday to thrash out a US-led plan to cap Russian crude oil prices.
- Officials will approve the details of the plan in a virtual meeting, the Wall Street Journal reported.
- Some analysts warn Moscow could retaliate by shutting down oil production, which could send crude prices soaring.
The US and its G7 allies plan to meet Friday to discuss putting a limit on the price of Russian oil, a move that could cut the revenue flowing into Moscow’s coffers — but risks sending crude prices soaring.
The countries’ finance ministers are expected to endorse the US-led price-cap plan and sign off on the details at a virtual meeting, Wall Street Journal reported Thursday, citing people familiar with the matter.
In recent months, US officials have been pushing for the G7 allies — Canada, France, Germany, Italy, Japan, and the UK — to adopt the price cap, saying it would damage Russian President Vladimir Putin’s war machine and bring down global inflation.
“This is the most effective way, we believe, to hit hard at Putin’s revenue and doing so will result in not only a drop in Putin’s oil revenue but also global energy prices as well,” White House spokesperson Karine Jean-Pierre said Wednesday.
However, some analysts warned the plan could prompt Russia to slash its oil production in retaliation, which could send crude prices soaring.
The meeting of the G7 finance ministers comes as Russian oil prices and exports remain strong, thanks to a successful pivot toward India and China.
Its oil exports averaged 7.75 million barrels a day in the first seven months of 2022, according to data from the International Energy Agency in August. That’s up from the 7.5 million average seen in 2021 as a whole.
The idea of the price-cap plan is that G7 countries would not allow refiners, traders, and financiers to handle Russian crude oil unless it was traded below a set price. The exact price level for Russian oil prices is likely to be under discussion Friday.
The UK has by far the most important market for shipping insurance in the world. That gives the G7 a certain amount of leverage over the global oil market, as does the economic power of the US and European Union.
However, analysts have questioned whether China and India will abide by any US-led plan, given their willingness to keep buying Russian oil even after the invasion of Ukraine in late February.
Some on Wall Street have warned crude prices could jump if the cap doesn’t play out as expected. JPMorgan said oil could even hit $380 a barrel in a worst-case scenario, although it said a jump to $180 is more likely.
Brent crude, the international benchmark, traded 2% lower at $93.60 a barrel Thursday.
Keywords: Russian Oil Prices, Russia, Read the original article on Business Insider