Steve Hanke, Professor of Applied Economics at Johns Hopkins University, has reiterated his skepticism about the impact of Western sanctions on the oil market stating that it would be the customers who would bear the brunt of these actions.
What Happened: Citing a Wall Street Journal report that highlighted Russia banning the sale of its oil and petroleum products to countries that put a cap on their sales price, Hanke said the moves are creating uncertainty and volatility in the market.
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“The US & their allies placed a $60/barrel price cap on RUS oil. In response, RUS will bar oil sales to countries enforcing the cap. The PRICE CAP will further politicize the oil market & generate price volatility & uncertainty. Customers will pay the bill,” Hanke tweeted.
The US & their allies placed a $60/barrel price cap on RUS oil. In response, RUS will bar oil sales to countries enforcing the cap. The PRICE CAP will further politicize the oil market & generate price volatility & uncertainty. Customers will pay the bill.https://t.co/gXPwffG8fu— Steve Hanke (@steve_hanke) December 28, 2022
According to the report, a decree signed by Russian President Vladimir Putin on Tuesday said exports would be banned under contracts that “directly or indirectly provide for the use of the price cap mechanism” between Feb. 1 and July 1.
The Group of Seven nations had agreed to put a price cap of $60-per-barrel on Russian crude oil and the European Union decided on the same price. The United States Brent Oil Fund BNO lost 1.4% in the last one month while the Vanguard Energy Index Fund ETF VDE shed over 6%.
In the first week of December, Putin's point man on energy and Russian Deputy Prime Minister Alexander Novak said that even if Russia has to trim production, it will not sell oil subject to a Western price cap.
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