"WASHINGTON -- The Biden administration's effort to roll out a price cap on Russian oil has hit delays, as the Treasury Department tries to ease industry concerns about the novel sanctions regime at the center of the West's economic battle with Russia.
The U.S. and its allies are preparing to bar businesses in their countries from shipping, financing and insuring Russian oil on Dec. 5 unless the oil is sold below a set price -- and had hoped to finalize the plan at least a month ahead of time to prepare oil markets. The U.S. is coordinating the strategy with other Group of Seven advanced democracies and Australia.
That timeline is now slipping. Officials aren't planning to set the level of the cap until after the U.S. midterm elections on Nov. 8, according to people familiar with the plans. The absence of the final details about how the cap will work has left the oil industry wondering whether Russian oil in transit on Dec. 5 will face new sanctions requirements when it arrives at its buyer.
"It's roughly 40 days to December 5th, a typical voyage to the longer routes from Russia run 45 to 60 days. So we're inside the window of a stranded cargo, there's some risk that crude-oil prices could rise as buyers bid for alternative sources," said Kevin Book, the managing director of ClearView Energy Partners.
The slower timeline comes as Biden administration officials are bracing for the possibility that announcement of the price cap would prompt Russia to threaten to cut off oil production and cause oil market volatility. Those developments could weigh on Democrats' standing if they occurred before an election that has hinged in part on oil prices. During the campaign, President Biden has repeatedly pointed to gasoline prices that have fallen in recent months from a record high earlier this year.
The process for receiving industry feedback on the plan, as well as negotiations on price both within the Biden administration and with the other allied countries, has also taken longer than expected, according to administration officials. G-7 countries set to enforce the cap are still working out their own plans for the sanctions.
A push to set the level for the price cap by mid-October slowed after the Organization of the Petroleum Exporting Countries and its Russia-led allies announced a production cut on Oct. 5, according to people familiar with the matter. Biden administration officials, who scrambled to devise a range of potential responses to the OPEC+ move, wanted to evaluate the price impact of the production cut before selecting a price for the cap, the people said.
The Treasury Department has talked with the oil market participants about the plan. The department released preliminary guidance on the price cap in September, advising companies they wouldn't face penalties under the plan if they inadvertently financed or insured Russian oil sold above the price cap.
For the U.S., the central goal for the price cap is to keep Russian oil flowing to global markets while limiting the profit Russia derives from the sales." [1]
1. World News: West's Plan to Cap Oil Prices Is Delayed
Duehren, Andrew; Wallace, Joe.
Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 29 Oct 2022: A.10.
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