A Laughable Explanation of the G7 Oil Price Buyers’ Cartel Emerges – Mish Talk

Yesterday, the G7 leaders met to discuss an oil buyers’ cartel to drive down the price of oil. I commented “The details are still being worked out. Whatever they are, they won’t work.”

Today,  we have the laughable details. 

Politico reports G7 Agrees to Find Ways to Impose Price Cap on Russian Oil.

Leaders of the G7 advanced economies on Tuesday reached a broad agreement to seek ways to impose a price cap on Russian oil, overcoming interventions from France that had sought a worldwide scheme, two officials told POLITICO.

The agreement, reached in the early hours of the third day of the G7 summit at Schloss Elmau in the Bavarian Alps, follows growing frustration among Western countries that their embargoes on Russian oil have had the counterproductive effect of driving up the global crude price. This has led to a situation where Moscow ends up earning more money for its war chest and where oil market reactions help drive runaway inflation.

The U.S. had pushed to tackle the problem via a price cap, which could be enforced by lifting sanctions on insurance for the cargo ships that transport Russian oil in return for a price deal. Under the U.S. plan discussed over the previous days, those sanctions would be lifted for countries that agreed only to buy Russian oil at a settled maximum price, creating an incentive to enforce the price cap.

The statement from the leaders ultimately identified this specifically as a preferred choice. “We will consider a range of approaches, including options for a possible comprehensive prohibition of all services, which enable transportation of Russian seaborne crude oil and petroleum products globally, unless the oil is purchased at or below a price to be agreed in consultations with international partners,” the statement said.