G7 finance ministers committed on Friday to jointly pursue a price cap on Russian oil.
Members of the forum, which includes Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States, announced the policy three months ago during a conference in Austria. A statement from the nations’ finance ministers published on Friday affirms that the bloc “will continue to stand with Ukraine for as long as it takes” by banning the sale of Russian oil above a certain price.
“We seek to establish a broad coalition in order to maximize effectiveness and urge all countries that still seek to import Russian oil and petroleum products to commit to doing so only at prices at or below the price cap,” the statement explained. “We reaffirm our own measures to phase out Russian oil and products from our domestic markets and underscore that the price cap measure aims to relieve pressure on global oil prices and support oil-importing countries globally by enabling continued access to Russian oil at or below the price cap for countries that continue such imports.”
The initial price cap will be established based upon “a range of technical inputs,” according to the statement, which acknowledged that each of the 27 nations in the European Union must unanimously affirm the plan.
Treasury Secretary Janet Yellen said in a statement that the price cap is “one of the most powerful tools we have to fight inflation” caused by future geopolitical events. “By committing to finalize and implement a price cap, the G7 will significantly reduce Russia’s main source of funding for its illegal war, while maintaining supplies to global energy markets by keeping Russian oil flowing at lower prices,” she remarked. “While we’ve seen energy prices ease in the United States, energy costs remain a concern for Americans and continue to be elevated globally.”
The national average price of gasoline was $2.38 per gallon when President Joe Biden assumed office, according to data from the Energy Information Administration, and increased to $3.53 per gallon by the start of the Russian invasion. Prices surpassed $5.00 per gallon in early June before subsiding to $3.81 per gallon as of Friday, according to AAA.
Natural gas prices in some parts of Europe have increased tenfold compared to normal levels, prompting various countries to introduce energy consumption quotas ahead of the winter months. Germany — the largest economy in Europe — imported roughly 55% of its natural gas from Russia before the invasion and has since reduced its dependence to 35%, although German gas supplies are slated to last only three months if Russia decides to end all exports.
The European Union has adopted the official policy of becoming “a climate-neutral society” by 2050 in accordance with the European Green Deal and the Paris Agreement. Earlier this week, Tesla and SpaceX CEO Elon Musk cautioned that the global economy places itself at risk by pursuing a rushed transition to renewable power.
“Realistically I think we need to use oil and gas in the short term, because otherwise civilization will crumble,” Musk told reporters at an energy summit in Norway. “One of the biggest challenges the world has ever faced is the transition to sustainable energy and to a sustainable economy. That will take some decades to complete.”