Finance ministers and central bank governors of countries from the G7 group of developed countries agreed today to introduce a price ceiling for Russian oil and oil products. The pricing mechanism has yet to be decided, foreign press agencies inform. Under these conditions, Russia does not want to supply oil at all. Economist Lukáš Kovanda points out that gasoline and diesel prices in the Czech Republic could rise to twice the current price.
On Thursday, Russian Deputy Prime Minister Alexander Novak called the introduction of a price cap a “complete absurdity” that would destabilize the entire industry. According to him, Russia will not supply oil or oil products to countries that support the establishment of a price ceiling.
Trinity Bank Chief Economist Lukáš Kovanda, in a comment for Echo24, referring to the American bank JP Morgan, said that if a barrel of Brent crude oil were sold at a price around the mentioned level of $380, gasoline and diesel in the Czech Republic would cost approximately 90 crowns per liter.
“It assumes that both consumption tax and VAT, as well as the margins of refineries and gas stations, would be at the current level. And the exchange rate of the crown to the dollar would also be at the current level. At the same time, if there really were to be a Russian retaliation, we can assume a further weakening of the koruna against the dollar, which would bring the price of fuel to the range of 90 to 100 crowns per liter,” wrote Kovanda.
The measure will enter into force on December 5 for crude oil and on February 5 of next year for refined petroleum products. These are the same dates when, as part of the EU’s sixth sanctions package against Russia, a partial embargo on the import of Russian oil and oil products into the EU will begin to apply.
Already in June, the G7 states announced that they would consider capping Russian oil prices as another method of putting pressure on Russia for its aggression against Ukraine. At the same time, Russia is one of the world’s largest oil exporters. US Treasury Secretary Janet Yellen said the measure would also help lower global energy prices.
This year, Russia could increase revenues from the sale of oil up to 337.5 billion dollars (about 8.3 trillion CZK), which is 38 percent more than last year. This follows from a document of the Russian Ministry of Economy, which is available to Reuters.
Novak also stated that Russian companies are ready for the European Union’s December embargo on the import of Russian oil and that they can maintain production at the current level. According to the Deputy Prime Minister’s forecast, mining may amount to 520 to 525 million tons by the end of the year. Last year, Russia extracted 524 million tons of oil.
Last year, 6.8 million tons of crude oil were imported into the Czech Republic, a year-on-year increase of 10.8 percent. Half of it was imported from Russia, according to statistics from the Ministry of Industry and Trade. The second largest importer was Kazakhstan.
The President of the European Commission (EC), Ursula von der Leyen, said today that the European Union should also cap the price of gas transported by pipeline from Russia to mitigate the effects of market manipulation by Russian President Vladimir Putin. Former Russian President Dmitry Medvedev responded to her words by announcing that Moscow would stop supplying gas to the Union in that case.