The U.S. is on track to join the G7 in placing a cap on Russian oil prices by December and will put out rules in the next few days regarding what permissions are needed to use financial products to ship Russian oil.
“We're going to put in place the price cap by December 5th, the date that the European six-sanction package goes into effect and really put in place by the United States, but also our G-7 allies,” Deputy Treasury Secretary Wally Adeyemo told Yahoo Finance Live in an exclusive interview on Thursday.
Last week, the G7 formally rolled out a plan to set a cap on Russian oil prices.
The U.S. has been in detailed talks with G7 partners about setting a price cap on Russian oil to reduce Russia’s revenue to fight Ukraine and ensure oil can keep flowing to the global market, while also preventing a spike in global oil prices as governments around the world work to tamp down multi-decade highs in inflation. Russia’s invasion of Ukraine has been a large contributor to the spike in oil prices this year.
Yahoo Finance previously reported the U.S. expects to join in on the G7 price cap this fall and that ahead of implementing the price cap, the U.S. is set to adopt complementary sanctions this fall before the December 5 deadline, when the G7’s sixth sanctions package against Russia goes into effect.
"Our goal is to make sure that the market remains well supplied because we think that will continue to put downward pressure on markets in order to make sure that we continue to see [energy] prices fall," Adeyemo said. "We want to keep putting downward pressure on prices in order to put downward pressure on headline inflation and inflation overall."
The price of oil has declined sharply, with WTI crude oil, the U.S. benchmark price, falling over 30% from above $120 a barrel in early June to around $83 as of Thursday. Meanwhile, retail gas prices have dropped from north of $5 a gallon nationally in mid-June to $3.75 a gallon as of Thursday, according to AAA data.
Adeyemo says the administration believes inflation can come down while the economy avoids recession, pointing to the increase in labor participation force seen in the August jobs report.
“We think that those increases in labor force participation will help us in terms of dealing with supply constraints we're seeing ... so, we believe there is a path to being able to both bring down inflation, [and] to continue to see the positive momentum we've seen in the economy,” said Adeyemo.
While the G7 has signed on to the oil price cap, the administration is interested in onboarding more Asian partners to the oil price cap coalition. Adeyemo was in India in August, and said he was encouraged that India is considering the oil price cap and is hopeful India will join and that China will consider it.
“The thing they care most about is paying the least amount of money for energy and making sure they can secure energy supply for the Indian people,” said Adeyemo. “That's why they're interested in continuing our conversation about the price cap.”
When asked whether the oil price can could work if India and China don’t join, Adeyemo says the administration still thinks the price cap can still be effective.
“It will create transparency with regard to the price that those on the price cap coalition are willing to pay and put countries like India, Indonesia, countries throughout Asia in a better position to negotiate lower prices with the Russians going forward.”
Ahead of the implementation of the price cap, Russia has been negotiating lower prices with some countries. Treasury says they’ve heard Russians are approaching other countries to store their oil.
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