EU $60 cap on Russian oil

[Chuckanut]

One thing seems certain. If Putin sells at $60 - he's still making money - and a lot of it - which he seems to need right now. YMMV

He needs it. Keep in mind the Russian economy is the about the same size as Italy and South Korea. IOW, while it is a big economy on a world wide scale, it's not so big that the country can fight a sustained war with little consequences for the public.

Keep in mind that Russian has to spread its wealth over more people than countries with similar sized economies. Same size pie, but many more mouths to feed.

Russian - 146 million
Italy - 62 million
S. Korea- 51 million

One wonders if Russian is fighting for a Pyrrhic victory at best.

 

[Koolau]

As youbet said early on:
Quote:
Allocation of scarce resources other than by price has seldom been efficient or successful.

Take out the "seldom" and replace with "never" and you got it!

 

[street]

Take out the "seldom" and replace with "never" and you got it!

Yep!

 

[Koolau]

He needs it. Keep in mind the Russian economy is the about the same size as Italy and South Korea. IOW, while it is a big economy on a world wide scale, it's not so big that the country can fight a sustained war with little consequences for the public.

Keep in mind that Russian has to spread its wealth over more people than countries with similar sized economies. Same size pie, but many more mouths to feed.

Russian - 146 million
Italy - 62 million
S. Korea- 51 million

One wonders if Russian is fighting for a Pyrrhic victory at best.

I've always assumed that there is a lot of ego and legacy enhancement involved but I'm no expert so YMMV.

 

[ERD50]

Take out the "seldom" and replace with "never" and you got it!

But, but, but - I've said many times on this forum "never say never"!


Hmmm, but this might be the exception?

-ERD50

 

[ls99]

EU playing with Russian oil prices has some interesting effects, elsewhere.

https://gcaptain.com/russian-oil-sanctions-fuel-boom-for-old-tankers/

"LONDON, Dec 5 (Reuters) – The market for old oil tankers is booming, and it’s all down to efforts by Western nations to curb trade in Russian crude."
"In recent months, aging tankers have been sold by Greek and Norwegian owners for record prices to pop-up Middle Eastern and Asian buyers taking advantage of sky-high charter prices for vessels willing to ship Russian oil to India and China. "

"New ship owners willing to transport Russian oil are cashing in. “Ships earning $80,000 a day in the Mediterranean can make $130,000 a day if they carry Russian oil,” said one ship broker, who declined to be named as he was not authorized to speak to the media."

The EU has shot themselves in the foot and other vital parts by deciding to rely on Russian gas, do away with their Nuke plants, and proposing to dictate prices for russian oil. A cold winter is the reward. BTW Hungary is exempt from the $60 rule. Orban had made some smart moves early on.

 

[Montecfo]

The EU has shot themselves in the foot and other vital parts by deciding to rely on Russian gas, do away with their Nuke plants, and proposing to dictate prices for russian oil. A cold winter is the reward. BTW Hungary is exempt from the $60 rule. Orban had made some smart moves early on.

And the US needs to learn from those mistakes. So far, I see little evidence of that.

 

[Koolau]

EU playing with Russian oil prices has some interesting effects, elsewhere.

https://gcaptain.com/russian-oil-sanctions-fuel-boom-for-old-tankers/

"LONDON, Dec 5 (Reuters) – The market for old oil tankers is booming, and it’s all down to efforts by Western nations to curb trade in Russian crude."
"In recent months, aging tankers have been sold by Greek and Norwegian owners for record prices to pop-up Middle Eastern and Asian buyers taking advantage of sky-high charter prices for vessels willing to ship Russian oil to India and China. "

"New ship owners willing to transport Russian oil are cashing in. “Ships earning $80,000 a day in the Mediterranean can make $130,000 a day if they carry Russian oil,” said one ship broker, who declined to be named as he was not authorized to speak to the media."

The EU has shot themselves in the foot and other vital parts by deciding to rely on Russian gas, do away with their Nuke plants, and proposing to dictate prices for russian oil. A cold winter is the reward. BTW Hungary is exempt from the $60 rule. Orban had made some smart moves early on.

And the US needs to learn from those mistakes. So far, I see little evidence of that.

Yeah, I was just thinking that the USA is much smarter than Europe though YMMV.

 

[street]

Yeah, I was just thinking that the USA is much smarter than Europe though YMMV.

I see a train wreck coming.

 

[Koolau]

I see a train wreck coming.

I think it's already begun and we're seeing the train wreck in slow motion. Take cover while ye may!

 

[foxfirev5]

The only option I had today was to buy gas at $3.25 for the RAV4. Minimal impact since I only needed 4.9 gal. Not much actionable on my end.

 

[Sunset]

....

One wonders if Russian is fighting for a Pyrrhic victory at best.

I think so, just pretend for a second Ukraine surrendered tomorrow, Russia would have a pretty damaged country and an unwilling workforce with a lack of women and children.
It will cost a lot to rebuild. Not much of a victory.

 

[ERD50]

Originally Posted by Chuckanut View Post
.... One wonders if Russian is fighting for a Pyrrhic victory at best.

think so, just pretend for a second Ukraine surrendered tomorrow, Russia would have a pretty damaged country and an unwilling workforce with a lack of women and children.
It will cost a lot to rebuild. Not much of a victory.

I hope this isn't getting too (internationally) political, I actually know very little about the politics between Russia, Ukraine, and the EU.

But I guess Putin's thought is that Ukraine was unfairly taken from Russia at one point, and now he wants it back, to be part of Russia? If that's the case, I just can't see the point of bombing and destroying so much of what you want as yours. And the people of Ukraine are hating him for all this death and destruction. What's the point of alienating the people that you want to be part of your country?

Seems it would be 'smarter' (but also terrible) to start bombing Finland, and saying he isn't going to stop bombing Finland until Ukraine is turned over to him.

I just don't understand Putin's end game here.

-ERD50

 

[Brat]

"What The Ship" YouTube posting talks about the Russian oil shipments by tanker, often quoting gcaptain. Another interesting resource are postings by Peter Zeihan.

Russia must keep pumping oil west because the wellheads are in permafrost and when oil slows the water in the oil freezes cracking the pipes. Putin saying he won't sell below a certain price is BS because he must sell at the best rate he can get because he doesn't have enough storage to mop hold unsold oil.

The EU's goal is to squeeze Russia financially. At the moment insurers are European. It is likely that others will join the insurance market.. for example in India.

Peter Zeihan has been talking about Russia's plans to take Ukraine for several years. Russia signed off on Ukraine's borders years ago. Russia's land grab plans continue west into NATO countries if they are successful in Ukraine. This is only a question of a fight with Russia now in Ukraine or later in Poland.

 

[Koolau]

Peter Zeihan has been talking about Russia's plans to take Ukraine for several years. Russia signed off on Ukraine's borders years ago. Russia's land grab plans continue west into NATO countries if they are successful in Ukraine. This is only a question of a fight with Russia now in Ukraine or later in Poland.

I have no personal insight but my Polish friend is convinced that Russia has it's eye on Poland next. He lived under their influence for most of his life - and he does not want to go back to it. Hence, Poland is likely the major refugee support center for Ukraine. My friend is personally helping many refugees with food and housing. It is similar throughout the country.

 

[eyenitnoy]

Please don't turn this into a political thread, that is not my intent.

Just what is the EU's cap on Russian oil supposed to do?



Does this mean the EU nations will only pay $60 per barrel for Russian oil? This seems ridiculous, how can the EU tell Russia what the EU will pay for Russia's oil? Say $80 oil is the price per barrel, say Russia is selling their oil under the going price and let's say the price they want is $70 a barrel. Russia is going to tell the EU it's $70 not $60. I guess this would mean the EU nations won't buy Russian oil unless Russia reduces it from $70 to $60? I doubt that will happen.

Maybe I'm missing something, this seems like a meaningless exercise.

Here’s how it’s supposed to work in practice: Any actor in a jurisdiction of the price-cap coalition that transports, insures, or finances the shipment of Russian oil by sea, can only do so if the price per barrel is $60 or less.

By cutting off the insurance of tankers, the financing, and banning transport, the goal is to try to force the price for Russian oil under the cap level. The thinking is that countries that are not part of the coalition (China, etc.) will use this as leverage to keep getting oil from Russia on the cheap.

It *could* backfire if Russia just stops selling. That would push up the price. But the thinking is this is unlikely as Russia needs cash for the war.

The tricky part of this is how it impacts the trading of futures contracts. These contracts are traded without knowing whether the final settlement price is above or below $60.

It will be interesting to see how this plays out.

 

[Car-Guy]

I don't know what's going on but I just saw regular gas "locally" for $2.39... Add in my discount and I'm beginning to like the direction this is taking.

 

[TDB622]

This war is basically a war to control energy. Everything else around it that you hear is fluff. The deliberate bombing of the Nordstream 2 pipeline just further shows that.
It makes total sense to blow up a clean way of getting oil, then creating "policy/price" demands for getting it delivered by tanker's...

There is going to be a lot of cold people this winter due to countries retiring certain dependable energy sources and all this nonsense going on around us. I think that those voices need to rise up and vote out (at all levels) the people that are responsible for to unnecessary deliberately created inflation, food, necessities, medicine, and energy shortages.

 

[zippy2020]

Putin gets hurt by the price caps because as noted above, he can't hold the global market captive with threats to withhold production/increase prices.

NO country, but especially Russia, can afford to stop oil production. It is not like 'flipping a switch'. Once you shut down excess production it can take 10-20 YEARS to bring it back on-line....and all the technical expertise to do it are....Western engineers. Neither Russia nor OPEC has any homegrown tech expertise.

Russia already has oil stored where it can be stored, and has very little room to store more.

China's economy was severely damaged by Xi's 'zero COVID' policy and their GDP is forecasted to sink to almost unheard of levels, well below the 4-5% mark. With the RE collapse the CCCP is not going to have a lot of money to buy as much Russian oil as they did before, and they won't need to anyway - I believe that's why they announced they were going to be increasing their coal usage (which is a large natural resource for them, and there goes the climate/pollution, sigh).

It will be interesting to see if self insurance or more likely, co-insurance can keep the tankers sailing. I have no idea of what global shipping insurance entails, but I should think that if it were easy, a lot of nations would have done it already rather than pay Western insurers for hundreds of years.

 

[zippy2020]

Just ran across this in MSN News. Very succinct and clear explanation of what the $60 cap is, and isn't:

(free link) https://www.msn.com/en-us/money/markets/putin-s-plan-to-take-on-the-world-economic-order-hits-a-wall/ar-AA15dgOa?ocid=winp1taskbar&cvid=065b19f23c0c4709f2a2e9343dfde090

 

[Koolau]

China's economy was severely damaged by Xi's 'zero COVID' policy and their GDP is forecasted to sink to almost unheard of levels, well below the 4-5% mark. With the RE collapse the CCCP is not going to have a lot of money to buy as much Russian oil as they did before, and they won't need to anyway - I believe that's why they announced they were going to be increasing their coal usage (which is a large natural resource for them, and there goes the climate/pollution, sigh).

Why is China suddenly making nice with the Saudis? All they have is oil. I thought they were in love with Russia right now.

 

[zippy2020]

The Saudis are also possible back-door sources of US tech/replacement parts. Have no idea if they are willing to buck the US but it doesn't hurt China to try. What they can't use or back-engineer they can ship to Russia, I would imagine.

 

[Koolau]

The Saudis are also possible back-door sources of US tech/replacement parts. Have no idea if they are willing to buck the US but it doesn't hurt China to try. What they can't use or back-engineer they can ship to Russia, I would imagine.

Heh, heh, you are just full of happy thoughts today!

 

[Toocold]

The cap (once set and working) can also be used as a tool to put additional pressure on Russia. Nothing would stop the G7/EU to reduce the cap to $55, $50 and continue to squeeze Russia. If it works, it's a good plan.

 

[Koolau]

This war is basically a war to control energy. Everything else around it that you hear is fluff. The deliberate bombing of the Nordstream 2 pipeline just further shows that.
It makes total sense to blow up a clean way of getting oil, then creating "policy/price" demands for getting it delivered by tanker's...

There is going to be a lot of cold people this winter due to countries retiring certain dependable energy sources and all this nonsense going on around us. I think that those voices need to rise up and vote out (at all levels) the people that are responsible for to unnecessary deliberately created inflation, food, necessities, medicine, and energy shortages.

I had quite an "energy" discussion the other night with my Polish friend. I've related here that their coal prices (used to be from Russia - now from far flung places like Africa) have gone up in price by 6X.

He fortunately had some large-chunk coal left over from last spring. Such coal will heat a house over night without rebanking. Unfortunately, so far, all the coal he can buy was designed for auto-feeding systems which he does not have. Keeping an adequate fire going with such coal is wasteful and requires much tending. It is much more difficult to conserve such coal.

In addition to coal, many Polish folks are resorting to wood - with enterprising folks going to the woods to glean (or probably, illegally cut) wood and deliver to customers - at high prices.

At one time, Poland was a major source of Euro coal and heating houses was inexpensive. But the EU now controls who/how much coal is produced and where. Poland was severely rationed on how much coal they could produce - hence the switch to Russian coal (with the current problems that creates.) My friend's "take" is that Germany controls energy within the EU. I can't confirm that, but it's kind of like Washington controlling our energy situation - it's debatable in extent but hardly deniable in total.

Heh, heh, I think my Polish friend is secretly "for" global warming as severe cold is not only expensive - it can be deadly in times like these. I consider my friend to be "living on the margins" while he knows folks much worse off than he is.

The church he belongs to is supporting many Ukrainian refugees. Supplying food and energy to them adds yet another level of hardship - though he realizes that refugees are in even worse shape than his family. Fortunately, there are many US and a few Euro NGOs that are helping refugees through churches and other Polish organizations. The energy situation is tenuous and more than an economic hardship for many Polish people. It's too bad that this is so tied up with geopolitical issues instead of humanitarian feelings. I guess that's the way of the world but it shouldn't be (end of sermon so YMMV.)