One year after the implementation of a Western price cap on Russian oil, reports suggest that the measure has had limited success. The cap, which was set at $60 per barrel, was initially successful but lost its impact once Russia found new buyers and developed its own maritime services to transport its oil. Despite the cap, Russian crude has recently traded above $80 per barrel.
The Centre for Research on Energy and Clean Air (CREA) states that the G7 oil price cap has not lived up to its potential due to a failure to enforce, strengthen, and consistently monitor the price cap. While the cap has reduced Russia's oil export profits by 14%, it has not fully curbed Russia's oil trade. The report suggests that the enforcement of the price cap has been uneven, allowing Russia to reduce the impact in the latter half of the year.
Russia has decreased its dependence on Western maritime services and built up its own 'ghost fleet' to transport its oil. This has allowed Russia to deliver crude at prices above the $60 limit. In addition, China and India have been buying up Russian supplies, boosting the West's supplies and dampening fears of a global shortage.
The report raises concerns about Russia's use of illegal tankers and the refining loophole. The refining loophole allows Russian crude to be purchased, refined, and then sold to the European Union and other countries that have banned seaborne imports of Russian crude.
In response to these findings, U.S. and European Union leaders are considering stricter implementation of the cap, with the U.S. already imposing sanctions on violators. The report suggests cutting the capped price in half and reinforcing penalties on violators to increase the effectiveness of the cap.