The European Union’s ban on Russian oil refineries comes into force on Sunday.
The ban on the import of Russian oil products, i.e. diesel, for example, into the European Union will come into force on Sunday.
Until now, about half of the diesel used by the EU has come from Russia, but from Sunday onwards the share will be zero.
The EU, the G7 countries and Australia agreed on a price ceiling for Russian oil refineries on Friday. The price ceiling for diesel and other higher value oil products was agreed to be $100 per barrel. The price ceiling for cheaper oil products, such as fuel oil, was agreed to be 45 dollars per barrel. A barrel is a unit of measurement in the oil trade. Its volume is 159 liters.
The arrangement is the same as with crude oil. The price ceiling for Russian crude oil came into effect at the same time as the EU’s import ban at the beginning of December.
Sea freight companies transporting Russian oil products must comply with the price ceiling if they want to receive transport insurance services or other financing from Western countries that set the price ceiling.
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– Recently, the world market price of diesel has been 110–120 dollars per barrel, which means that Russian diesel has been sold cheaper than the world market price, as happened with crude oil, says a researcher from the Institute for Economic Research, Etla Ville Kaitila for STT.
The price ceiling for Russian crude oil is $60 per barrel, but it has recently been sold for around $50 per barrel. The world market price of crude oil is around 80 dollars per barrel.
There is a shortage of diesel
There is a worldwide shortage of diesel, so Russia will very likely find other buyers for its diesel instead of the EU, says Kaitila.
– However, the price is probably lower than the one received from the EU, and the transport costs are higher when the journeys are longer.
According to Kaitila, Russia has managed to export crude oil to India and China, but the buyers there have been able to negotiate favorable contracts thanks to the EU’s import ban.
According to Kaitila’s assessment, this is probably also the case with diesel, which reduces Russia’s export earnings. So the EU’s import ban and price ceiling work.
Kaitila believes that the EU’s import ban and the now agreed price ceiling have been taken into account in the market some time ago. There will hardly be major price shocks.
According to Kaitila, the impact of the Russian sanctions and price ceilings on the average consumer will be greater than how the global economy recovers and how it affects the price of crude oil.
– The exchange rate between the euro and the dollar is also of great importance. In recent months, the euro has strengthened to about 1.1 dollars, and it has lowered the price of fuel in euros. Ultimately, it will be seen at the pump station.
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