A price cap on Russian crude took effect back in December. This proved difficult to enforce in practice. The oil could still be processed into diesel in India, for example, and thus come to Europe. According to Hans van Cleef, sector economist for energy at Publieke Zaken, the price ceiling is nevertheless more than a paper tiger.
"This does work, but not everything can be stopped. The effect of the ceiling will therefore be seen mainly in the prices at which oil is traded. 'It is perhaps just as well that part of it goes to the market, otherwise those prices will go sky high. That will have to be compensated, and we don't like that either.
Diesel price
In the short term, the market price for diesel will not change quickly, Van Cleef believes. There are huge stocks of diesel in Europe, in addition, countries in northern and western Europe can easily obtain alternatives by sea. Eastern Europe does not have that option, those countries got the crude oil directly through pipelines from Russia. 'Problems are only going to arise when there are shortages there. That will start to drive up the price and we will also notice those effects here.' According to Van Cleef, this will not happen in the coming months.
The question is whether the new ceiling will hit the Russian economy. According to Van Cleef, this measure is one of many, the effects of which will be seen in the long term. 'Companies like Shell and BP have already pulled out, there are already many other sanctions, and Russians are already noticing it in their wallets. Those effects will only get worse.'
Backlash
As of Feb. 1, Russian President Putin will no longer allow Russian oil to be exported to countries that have a price ceiling. This was in retaliation for December's price ceiling and now applies only to crude oil. There is a plausible chance that it will also apply to other oil products. But that's a waste of time, Van Cleef believes. "We don't want it and he says we can't have it. Such a countermeasure doesn't have much effect.'
©BNR
