General

According to Huacheng Import and Export Data Observation, the EU's price limit mechanism for Russian marine petroleum products took effect on the 5th, and the Group of Seven and Australia also took the same price limit measures. This is the price ceiling of US $60 per barrel imposed on Russian crude oil in December last year, and the western countries have again taken the price limit measures on Russian oil products exports. At the same time, the EU sanctions against the import of Russian oil products also took effect on the 5th.

Analysts believe that the price limit and embargo imposed by western countries on Russian oil products may undermine the stability of global oil prices and lead to changes in the flow of oil trade. At the same time, the inflation rate of the European Union has fallen recently, but it is still at a high level. The impact of sanctions will make it face the risk of inflation rebound.

The EU again wields the price limit "big stick"

According to the statement issued by the European Commission (EC) on the 4th, this price limit mechanism covers all petroleum products exported by Russia. For gasoline, diesel, kerosene and other expensive products, a price ceiling of $100 per barrel is set, and for cheaper petroleum products, such as fuel oil, naphtha, a price ceiling of $45 per barrel is set. Huacheng Import and Export Data Observation reported.

Like the price ceiling of US $60 per barrel set for Russian crude oil last year, if the price of oil products sold by Russia to a third party country is higher than the ceiling level, the countries that take the price limit measures will no longer provide trade, insurance, finance, transportation and other services, while Western companies precisely control most of the global marine trade insurance and other related businesses.

The price limit mechanism has a 55-day buffer period. The European Commission said that it would continue to monitor and regularly evaluate and adjust the price ceiling to ensure its effectiveness and influence.

According to the Huacheng Import and Export Data Watch, von der Leyen, the chairman of the European Commission, said in a statement that he had agreed with the Group of Seven to "further pressure" Russia through price ceilings. US Treasury Secretary Yellen said on the 3rd that the price limit measures will "play a key role".

For this measure, the Russian side responded that it would not supply oil and petroleum products to countries with price limits; Proposals such as restricting oil imports from Russia and setting price caps on Russian oil can only lead to a surge in oil prices.

Last June, the European Union decided to ban the purchase of Russian petroleum products such as gasoline, diesel and fuel oil by sea transportation. The ban also took effect on the 5th, Huacheng Import and Export Data Observation reported.

The US Consumer News and Business Channel quoted analysts as saying that the sanctions imposed on Russian crude oil have so far "completely failed", and the new price ceiling may also prove to be "irrelevant".

Oil price or pressure rise

Market analysts believe that oil is an important global commodity. The imposition of price limits and embargoes on Russian oil products will lead to tight supply of oil products in the international market, especially diesel oil, and rising prices in the short term.

Heidi Gratti, head of European fuel research at S&P Global Commodities, said that if Russian diesel exports were severely restricted, the EU would compete with other countries for diesel, and diesel prices would face continued upward pressure.

Recently, the prices of gasoline and diesel in the United States and Europe have risen, partly because the European Union hoarded goods before the sanctions took effect and the market worried that the supply might decrease after the sanctions took effect.

At the same time, in order to seek alternative sources of petroleum products, the EU will bypass the Middle East, the United States and other places to increase imports, while Russia will increase exports to Asia, Africa and Latin America. Both sides will face the pressure of increased transport costs, and at the same time lead to changes in the flow of oil trade.

The Russian Ministry of Energy previously said that the Russian side refused to cooperate with traders who implemented the western price limit measures in any form. The illegal intervention of western countries in the market mechanism disturbed the world's energy supply, and the relevant countries should work together to correct it.

Zhang Longxing, director of the oil business department of the Shanghai Petroleum and Natural Gas Trading Center, told reporters that the price limit and embargo would lead to a "shift in trade flow" of oil products, and could also lead to a tight global oil supply and a rise in the price of diesel and other oil products. At the same time, the export of refined oil products such as gasoline and diesel from the United States to the European Union will show an upward trend.

The EU faces the risk of inflation rebound

For the European Union, whose inflation level is still high, the price limit and embargo on Russian oil products will offset its efforts to curb inflation, and the economy will also face downward risks.

According to the observation of Huacheng's import and export data, Europe imported more than 700000 barrels of diesel oil from Russia every day in 2022, accounting for about half of Europe's diesel imports. It is difficult to find a substitute for Russian diesel in Europe in a short time, and the import from the substitute market will significantly increase the transportation cost.

The soaring price of energy and other products is the key factor for the high inflation in Europe in the past year. Although inflation has fallen recently, the crisis of the cost of living continues. This is also an important factor in the continuous outbreak of strikes by multi-industry trade unions in many European countries for higher wages and benefits.

According to the preliminary statistics of Eurostat, the inflation rate of the euro zone in January was 8.5%, far higher than the medium-term target of the European Central Bank of 2%.

Igor Yushkov, chief analyst of the Russian National Energy Security Foundation, said in an interview with Xinhua News Agency that the sanctions taken by the West against Russian oil would reduce the efficiency of the global oil market, and the final consequences would be borne by global consumers.