A senior US Treasury official said on Tuesday that the global price of oil could rise 40 percent to about $140 a barrel if a proposed ceiling for the price of Russian crude was not imposed, along with waivers from sanctions allowing shipments below that price.
The official said US Treasury Secretary Janet Yellen will discuss imposing the proposed price cap with Japanese Finance Minister Shunichi Suzuki when they meet today.
The official said the goal was to set the price at a level that would cover the cost of Russia’s production so that Moscow would be incentivized to continue exporting oil, but not at prices high enough to allow it to finance its war against Ukraine.
He added that Japanese officials had expressed concern about imposing a price ceiling too low, but they had not rejected a possible price range between $40 and $60 a barrel.
As the European Union prepares to impose a gradual ban on Russian oil and ban marine insurance on any tanker carrying Russian crude, a move Britain is expected to emulate, Yellen sees imposing a price cap as a way to keep oil flowing and avoid further price hikes, which could lead to recession.
Sources proposed a “price exception” that would cancel the ban on marine insurance for shipments below the agreed price to prevent millions of barrels of daily Russian oil production from being locked up due to the lack of insurance.
The US Treasury official said that the ministry’s estimates show that implementing the sanctions without the price exception could lead to significant increases in crude oil prices, which could reach about $140 a barrel from about $100 currently.