Capping the price of Russian oil to the EU bureaucrat's taste is not in the interest of people or world shipping
 One doubts the success of the European Union's efforts at enforcing collective price-fixing any more than one would bet of success of OPEC efforts in days of yore to stop Nigeria selling cut rate oil when they needed ready cash.
The EU plan was to cap the price of Russian oil, to enforce a low price as Moscow became the only practical short-term supplier. Of course, there is no real oil shortage. What oil supply troubles we face are largely regulatory in nature enacted and enforced by a feminized media, academic, bureaucratic complex that pursues policies against fossil fuels to achieve a utopian emission-free world.
Under the previous US administration, America was a net exporter of oil. Moreover, there are many methods of reducing oil consumption and air pollution if there were any urgent need, which there isn't.
Solutions can be drawn from our needless panicky reaction to needless the Covid scare - namely, remote working and remote learning that would bring down the cost of living without reducing the quality of life - and arguably improving it.
We have been ill-served by the feminized media in dealing with the Russo-Ukraine War as we have been ill-served by it in everything else. The coverage - when there is any - is entirely one-sided. We hear of massive casualties on the Russian side and none on the Ukrainian side. We do not have reporters at the front or embedded with active service units, or even press conference coverage with maps explaining what has happened in the field.
So it is no surprise that we are ill-served by the media unless their desired outcomes are in plain sight, and they can report it as imminent and/or fact or any dastardly deeds committed by Russians.
What worries Bloomberg - and being a business news agency, legitimately so - is that the EU’s sanctions on Russian petroleum could end up depriving a swath of the world’s tanker fleet of insurance.
"The European Union’s latest sanctions on Russian petroleum could end up depriving a swath of the world’s tanker fleet of industry standard insurance, a move that threatens to undermine US efforts to avert an oil supply shock," said Bloomberg.
"The bloc’s eighth round of sanctions state that if a tanker owner transports Russian crude above an agreed price threshold, their ship would be prohibited from getting EU services needed to ship the commodity, such as insurance, “in the future”. Owners could avoid that fate by agreeing to transport oil that’s been bought at a capped price," it said.
The measure, which would apply to all crude, is conditional on a G-7 agreement to cap the price of Russian oil, and would stay in place as long as any price threshold is in force.
The goal of the provision is to incentivize adherence to the cap while deterring breaches because it could pressure shipowners to choose between trading with Russia on Moscow’s terms or remaining in the international market. The provision could polarize the tanker industry given that the biggest buyers of Russian oil - China and India - have made no commitment to paying a capped price.
"The clause also means that the price cap - which the US has also promoted as a means of freeing up Russian crude - presents a binary choice for players in the oil and tanker markets. They can either avail themselves of Russian oil, or help push Russia into accepting a capped price," said Bloomberg.
“In the event that a vessel under the flag of a third country has transported Russian crude oil or petroleum products purchased at a price above the price cap, it should be prohibited to provide technical assistance, brokering services, financing or financial assistance, including insurance, related to any transport in the future by that vessel of crude oil or petroleum products,” it said.
It’s not clear that this provision was coordinated with the US since Washington had been telling European allies that even countries that didn’t agree to the price cap plan could benefit from negotiating lower prices on Russian oil. US officials have repeatedly emphasized that their primary goal is to prevent oil from being trapped in Russia by the EU’s ban on shipping services.
Europe is home to a swath of insurance mutuals that form part of the International Group of P&I Clubs. These firms cover their member firms - the shipowners - against risks including oil spills. The continent is also at the heart of the world’s reinsurance market.
But Washington, DC-based Rapidan Energy Group, an energy sector research house, said: “Third-country ships that are found to have violated the price cap can never again use EU services, such as insurance and finance. Because many shipowners worldwide will be reluctant to permanently forfeit their access to EU shipping services, we expect they will avoid non-compliant cargoes. This will force President Putin to either accept the price cap (a course he has explicitly ruled out) or curtail exports and shut-in production.”
But the UK, another big insurance and reinsurance hub, hadn’t announced a ban mirroring Europe’s.
One hopes that there will be enough hemming and hawing in the weeks to come that will bring about more reasoned dialogue to international affairs. This will not only change the direction of the Russo-Ukrainian conflict, but also the governing attitudes to towards fossil fuels, their use and their conservation.
It seems what is needed now to evade an easily avoidable crisis in shipping, is a movement which might adopts the slogan, "Defang the regulators". The previous US administration had made considerable progress in this area, but its successors appear to have adopted the mantra "in regulation we trust". Here is the crux of the matter, those who appear to favour notions like "Defund the police" actually want to hire more police in the form of inspectors to police the increasing number of bans and mandates that political forces have in mind.
The problem with tanker moving oil at prices above the cap set by the EU, and perhaps the G-7 is allowing the state to interfere with a market upon which the world is dependent. One can truly question the wisdom of such a development. |
