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G7 Imposing Dual Price Caps on Russian Oil Products

The Group of Seven (G7) coalition, consisting of Australia, Canada, Japan, the United States, and the 27-nation European Union, will seek to establish two price caps on Russian refined oil products in February.

Flags of G7 countries
Flags of G7 countries

According to a G7 official, the coalition introduced a $60 per barrel price cap on Russian crude oil on December 5th, in addition to the EU embargo on imports of Russian crude by sea. Furthermore, from February 5th, the coalition will implement price caps on Russian products such as diesel, kerosene, and fuel oil to reduce Moscow's revenue from energy exports and its ability to finance its invasion of Ukraine.

However, capping the prices of Russian oil products is more complex than setting a price limit on crude oil alone due to the various oil products available and the fact that their prices often depend on the location of purchase rather than the location of production. The official cited the example of diesel and kerosene, which trade at a premium to crude. At the same time, fuel oil typically sells at a discount, which is why the G7 is considering implementing two price caps.