Price Cap On Russian Oil May Lead To Higher Fuel Prices In Long Term - Ex-Regulator

The West's price cap on Russian oil may lead to a rise in fuel prices in a few years after supply dwindles and Moscow does not have enough revenue to support additional drilling, a former commissioner in the Texas Railroad Commission, the industry regulator in the top oil-producing state, told Sputnik

WASHINGTON (UrduPoint News / Sputnik - 13th December, 2022) The West's price cap on Russian oil may lead to a rise in fuel prices in a few years after supply dwindles and Moscow does not have enough revenue to support additional drilling, a former commissioner in the Texas Railroad Commission, the industry regulator in the top oil-producing state, told Sputnik.

The United States, European Union and other Western allies last week placed a price cap of $60 per barrel on Russian crude as part of an effort to limit earnings they said Moscow could use to fund the special military operation in Ukraine.

Former Texas Railroad Commission commissioner Ryan Sitton said that in 2025-2026 he will be able to explain to everyone why oil production is insufficient.

"Because the president of the United States said let's dump the Russian oil barrels on the market at $60 a barrel, which will both put those barrels on the market and it will drive the price down around the globe. Looks good for an election, it does not look good for the future of those who use oil, which is most of the world," Sitton said.

Sitton pointed out that the price cap plan will raise gasoline prices in the future, in about two years, because in the short-term the cap will drive down revenue and crude oil supply from other countries, hurting their financial resources to continue to drill more wells.

The price cap plan should drop gasoline prices down for a short while before the long-term consequences begin to emerge once Russian supply drops, according to Sitton.

The European Union's $60 per barrel price cap on Russian oil went into effect on December 5, together with a ban on seaborne exports. The cap will be reviewed every two months to remain at 5% below the International Energy Agency benchmark. The G7 nations and Australia have also capped Russian oil exports at $60 per barrel.

Russian Deputy Prime Minister Alexander Novak, commenting on the decision, said that Russia would not accept the price cap, even if the measure forced it to cut oil production. According to Novak, such restrictions are interfering with market forces.

Sitton expects Russia will sell its oil to countries imposing the price cap.

As of Monday night, the West Texas Intermediate (WTI) oil benchmark was $73 a barrel and the Brent Crude benchmark nearly $80 a barrel.