The EU already imposed an embargo on Russian oilMy only question is if they can sell as much as they sold to EU, at what price and for how long? I know that the main partners are China and India, but they need a small fraction of what EU needs.
It would be fine if 70% of the world didnt care about virtue signalling. I hope you have sufficient supplies of fuel for this winter.I wouldn't be so sure it's a bad plan and here is why:
So far, Russia's response seems like blackmail to me, because they cannot do anything about it.
- Capping the oil price removes the possibility of transport insurance because this insurance is valid only if the price is above a level. Russia cannot do anything about it;
- Again: what will Russia do with the remaining oil supply? So far, they are burning most of it. And a day will come when countries like China and India won't want any more oil, because their supplies are full. Not to mention the discount Russia must apply to be able to sell their oil;
- (Continuation of the above point) Russia must either burn the excess oil and gas (which they're doing) and/or close a part of their refineries and oil wells. Restarting them will cost a lot of time and money.
Capping the oil price removes the possibility of transport insurance because this insurance is valid only if the price is above a level.
Their government has the cash right now to subsidise food, and as long as they have oil and energy money, they can keep subsiding.
“But what the price of energy will be next year is anybody’s guess. It will get a lot harder for them from next year onwards.
“At some point I believe their economy will be in very bad shape, either next year or the year after.
“But that depends on the price of energy.
“The rouble is doing OK because they are making people only buy and sell using the rouble. That will keep the currency strong for a while.”
They will do even better economically, because they are in the process of replacing multinationals that left the domestic market like Renault or Toyota with domestic brands, including across a whole range of consumer products, from food to clothing to furniture and so forth. This year was supposed to be the hardest, it's smooth sailing after that once they have had the time to put together a broad domestic industry.
The kind of problems they will likely run into is from having too strong a currency and other repercussions from high energy exports (aka the Dutch Disease), and from running out of domestic labor. Those are the kinds of problems any industrialized country would love to have.
This is exactly why the energy price spillover could reach north America and all points of the globe in the out-months. Fungible markets eventually stabilize internationally, with all consumers paying market price (barring nationalized countries). The US might make it through the winter with moderate energy price increases, but next summer we will be catching up, if things don't change. Personally, I don't see how my business could endure a 10X energy bill. I can pass along only so much to my customers, then the deal isn't sweet enough for anyone. We are reaching the elastic break-point already. No way a little coffee shop can pay 10K Euros a month for power. I can already make a pot of coffee at home for a fraction of a ridiculous starbucks.Don't forget oil. Oil is the primary component of common products like plastic, asphalt, synthetic rubber, detergents, pesticides and herbicides, paint, and carpet. Only about half of oil is converted into gasoline.
Russia is producing almost 10 million barrels of oil a day. Worldwide demand is about 90 million barrels, so Russia is producing over 10% of the total supply. I'm not sure western nations are even bright enough to understand banning Russian petroleum doesn't stop their oil being sold and converted into, say, Chinese plastic. Oil is priced on a global exchange, so 100% of Russian oil could be turned into plastic and it has the same economic result as if it were all turned into gasoline.
Russia's oil production is far higher than expected this year as it reroutes supplies to Asia, IEA saysThe IEA thought Russian oil production would plunge by millions of barrels, but it's hardly dropped at all.markets.businessinsider.com