Sign up now for FREE unlimited access to Reuters.com Register TOKYO, July 12 (Reuters) – The world oil price could jump 40 percent to around $140 a barrel if a proposed price ceiling for Russian oil is not adopted, along with sanctions waivers that would allow shipments below this price, according to a high level of the US. The finance ministry official said on Tuesday. US Treasury Secretary Janet Yellen will discuss the implementation of the US price cap proposal and global economic developments with Japanese Finance Minister Shunichi Suzuki when they meet later on Tuesday, the official said. The aim was to set the price at a level that covered Russia’s marginal cost of production, to give Moscow an incentive to continue exporting oil, but not high enough to allow it to finance the war against Ukraine, he said. official. Sign up now for FREE unlimited access to Reuters.com Register Japanese officials had expressed concern about the price ceiling being set too low, but had not ruled out a possible price range of $40 to $60 a barrel, the official said. Yellen is using her first trip to the Indo-Pacific region as Treasury secretary to build support for a proposed price cap on Russian oil and answer nagging questions about its effectiveness if India, China and other buyers now cheap Russian oil do not participate. The United States and other G7 countries – Britain, Canada, Germany, France, Italy and Japan, along with the European Union – agreed in June to explore imposing the cap to reduce Moscow’s revenue and drain of her war chest, but the details are still being worked out. read more As the European Union prepares to impose a phased embargo on Russian oil and ban marine insurance for any tanker carrying Russian oil, a move Britain is expected to follow, Yellen sees the cap as a way to keep oil flowing oil and prevent further price spikes that could lead to recession.
‘PRICE EXCEPTION’
Washington has proposed a “price exception” that would lift the ban on shipping insurance for orders below the agreed price, in order to prevent millions of barrels a day of Russian oil production from being stranded due to a lack of insurance. Treasury modeling showed that implementing the sanctions without the price exemption could cause significant increases in the price of crude oil, potentially reaching $140 a barrel from about $100 a barrel now, the Treasury official said. . However, there was some uncertainty around the estimates, particularly around assumptions about the elasticity of oil demand, the official added. EU, British and US companies account for about 90% of global oil shipping insurance and reinsurance, which would make it difficult for Russia to keep oil flowing once those sanctions take effect later this year, the official said . While some experts believe that Russia, India and China could step in with sovereign bonds, Treasury officials did not share that view, the official said. Sign up now for FREE unlimited access to Reuters.com Register Report by Andrea Shalal. Edited by Tom Hogue & Shri Navaratnam Our Standards: The Thomson Reuters Trust Principles.
