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Tuesday, May 28, 2024

Price ceiling for Russian oil. Poland, Lithuania and Estonia want it to be reduced

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Poland, Estonia and Lithuania are demanding a reduction in the price ceiling for Russian oil from USD 60 to USD 51.45 per barrel in Brussels. This issue is to be discussed on Wednesday at a meeting of member states’ ambassadors to the EU, according to PAP information.

The price ceiling for Russian oil is intended to limit the proceeds from the sale of the raw material to the Russian budget, however, as three countries indicate, Russia she was able to adapt to it. While Russian oil exports to the European Union fell to around 600,000 barrels a day in January from 1 million barrels a day in December, Russian companies were able to export more to other markets, such as ChinaIndia or Turkey. The countries indicate that the fixing of price ceilings for Russian oil did not cause disturbances on the global oil market, which remains stable. World oil demand is currently low, as are oil prices.

Despite the price cap, Russia still earns a fortune

Three countries prove that despite the loss of revenue from the sale of oil Russia still earns millions of dollars a day. Ships owned or insured in the EU and the UK carry €310 million worth of Russian fossil fuels a day, which is 65% of the total. of the total value of Russian fossil fuel exports by sea. Russia is still making money about $135 million a day on oil exports (based on data from the International Energy Agency). Therefore, as pointed out by Poland, Estonia and Lithuania, in a document seen by PAP, these data argue for lowering the price cap for Russian oil in order to reduce revenues to the Russian budget. Three Member States they propose lowering it from USD 60 to USD 51.45 per barrel. According to PAP information, this matter will be discussed on Wednesday at a meeting of the ambassadors of the member states to the EU.

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Time for the first review of the price cap

On December 3, 2022, the EU agreed to a $60-per-barrel price cap for Russian oil and its subsequent revisions. It was agreed that in order to achieve the goals of the price cap, including the possibility of reducing Russia’s revenues from oil sales, the cap will be at least 5% higher than in the previous year. lower than the average market price of Russian oil and petroleum products, calculated on the basis of data from the International Energy Agency. On February 4, 2023, the EU agreed that the first review would be carried out by mid-March 2023.

According to an IEA report of February 15, Russia’s average export price of crude oil transported by sea (excluding freight and insurance costs) was $53 a barrel in January. This was USD 0.8 per barrel less than in December 2022. Russia’s January revenues from oil sales amounted to USD 13 billion (according to the aforementioned IEA report), and if this amount were to be reduced by 5%, Russia’s income would fall by USD 650 million per month.

Main photo source: Shutterstock



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