Oil Supply Won't Be Affected by Stricter Price Cap Enforcement

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By Katya Golubkova & Sakura Murakami

Fatih Birol, Executive Director of the International Energy Agency, said that the IEA does not believe the Group of Seven countries' efforts to combat the evasion of Russian energy price caps will have any impact on the crude oil and petroleum products supply situation.

The G7 countries, the European Union, and Australia have agreed to cap the price of Russian crude oil at $60 per barrel and to set a maximum price for Russian oil to prevent Moscow from gaining revenue for its invasion in Ukraine.

The G7 said Saturday that it would increase efforts to combat evasion while "avoiding spillover effects" and maintaining the global energy supply.

Birol, who spoke to Reuters on the sidelines at the summit, said that the IEA does not believe the increased enforcement of price caps will have an impact on global oil and fuel supplies.

He said: "We will always reflect any significant changes on the markets in our analyses and reports. But for now, I do not see a need to change our analysis."

Birol said that the price cap achieved two major objectives. It did not cause a tightening of the market as Russian oil continued flowing, but it also reduced Moscow's revenue.

"Russia played the energy card and failed." Birol stated that there were some "loopholes" and challenges to the smooth functioning of the oil cap.


The G7 also added support for gas investments to the communique of Saturday, stating that this was a "temporary" solution to deal with potential market shortages as nations try to decouple themselves from Russian energy.

Climate activists have expressed alarm at the move, warning that it may not achieve its goal of achieving net-zero emissions by 2050 or limiting global warming to just 1.5 degrees Celsius.

Birol stated that "it may have an impact, but the countries reiterated once again that even if some effects slow down in this area, they will accelerate in other areas and it won't change their determination to reach the 1.5 degree Celsius target."

The clean energy transition is occurring much faster than most people think.

Sources have stated that the language change was introduced by Germany, which used to be a major buyer of Russian natural gas. The communique also did not include a timeline for investment in the gas sector.

"There's no timetable there. But I think that the biggest issue is the fact that European countries, in particular, have relied on Russian gas for almost decades. Birol stated that it was not possible to make a complete change from one day into the next.

"(German)Chancellor (Olaf Scholz) made it clear repeatedly that Germany is keen to achieve this 1.5 degree target. "I believe his words."