While the energy crisis is hitting Europe hard, oil prices have recorded “their third consecutive monthly decline”, notice Bloomberg, investors fearing that the “monetary policy tightening” and the “China’s economic slowdown will affect crude demand”.
The price of Brent, the benchmark oil in Europe, fell by 12% in August, while that of its American counterpart, the West Texas Intermediate, rose again on Wednesday August 31, “below 90 dollars a barrel”, details the American economic media.
Crude highs and lows
After the invasion of Ukraine, prices had soared out of fear “that Russian crude be excluded from the market by sanctions”, remind him Wall Street Journal. Since then, the contraction in demand “in a context of deteriorating economic conditions” drove prices down. But in a few weeks, “it was demand fears that won the battle”. An analyst explains to the Wall Street daily:
“The oil market is shifting from recession fear to recession acceptance.”
Consumption is down in the United States and Europe due to high prices. Inflation that central banks have so far failed to curb, although they have raised their interest rates. The situation in China, where the resurgence of Covid is once again threatening the economy with a slowdown, with confinements in Shenzhen, Guangzhou and Dalian, “raises concerns about the loss of appetite for oil from the world’s second largest economy”.
It is in this context that the G7 (which brings together the United States, Germany, the United Kingdom, France, Italy, Japan and Canada) should present a plan this week to set a ceiling on the Russian oil price. the Wall Street Journal reveals in another article that its implementation should be “approved” during the meeting of G7 finance ministers by videoconference this Friday, September 2.
For the major American daily, this “expected announcement opens a new front in the West’s so far largely unsuccessful efforts to cut Russia’s energy revenues, as the war in Ukraine shows no signs of abating”. The details of this plan are not yet known. “complex” to establish.
Cap rather than ban
For months Western countries have been looking for ways to undermine the “Russian war machine”, which derives half of its budget revenue from oil and gas. The difficulty is to maintain “enough Russian oil on world markets to prevent another spike in already high energy prices”. The G7 countries, which represent “just over 30% of the world economy”, should ban “to finance and insure Russian oil shipments” below a specified price.
US Treasury Secretary Janet Yellen was the first to mention “the idea of a ceiling in the spring”, a less drastic measure than the embargo on Russian oil approved in June by the European Union. The United States argues that it risks “cause a price spike”, of which “doubt” European officials. US Treasury experts have pulled out their calculators and estimate that the price of crude could reach “140 dollars le baril” if the embargo comes into force in December, underlines the Wall Street Journal.
Hit Russian revenue
The capping is “the most effective way, in our opinion, to hit Putin’s income hard”, explains the spokesperson for the White House, Karine Jean-Pierre, in another article by Bloomberg.
Janet Yellen secured UK help on Wednesday August 31, ahead of the G7 meeting. Nadhim Zahawi, the British finance minister, who was visiting him, said to himself “ready to work to convince more countries to support the measure”, reports The Independent. Janet Yellen hit the nail on the head from the start of the game:
“Without a cap, we face the threat of soaring global energy prices if the majority of Russian energy production is shut down.”