Would A Price Cap On Russian Oil Help Curb Its Revenue?

Yves here. Perhaps I am missing something, but Treasury Secretary Janet Yellen’s oil price fixing scheme is an idea only some economists could love. Yellen proposed that US and EU agree to pay only $70 a barrel for Russian oil.

Lambert had missed this story and laughed out loud when I told him. Needless to say, this proposal marks a big change, and in a short period of time, from confident stories like How Much Oil Does the U.S. Import From Russia and Why Did Biden Ban It? in the Wall Street Journal in April. As its subhead indicated, the spin then was that Russian supply was marginal” “U.S. had until recently turned to Russian crude to service more isolated coastal markets and keep refineries running at optimal levels.”

Yellen’s cover story was that a buyer price cap was necessary to keep the Russian state, which has elected to get most of its revenue from energy price sales, from continuing to make out from current high oil prices. Russia is now making more on foreign oil sales, even with offering a sanctions discount and at reduced volumes, than it did last year.

But it’s a pretty remarkable shift to go from trying to punish Russia by not buying its energy to now pressing for a discount because you are obviously indispensable.

Oh, and despite being an unfriendly countries, the collective West is trying to get an even bigger break than Russia is giving to its besties, which is $30 a barrel, so the net price to Russia is around $90. Oil has dropped briefly to $100 a couple of times this year, but that was due to China lockdowns, an issue that will at most only be operative intermittently. Indeed, with Turkey eyeing territory in Syria and Israel playing harder ball with Iran, escalation in the Middle East could also push oil prices even higher.

The US price scheme is aggressive even in recent historical terms. Oil prices were rising due to “We’re acting like Covid is over” rebound and were solidly above $70 a barrel in the second half of the year.

Let us also remember that the US embargoed Russian oil in early March. Since then, the US has been trying to mitigate the impact via releases from its Strategic Petroleum Reserve, browbeating Saudi Arabia, and trying to make nice to Venezuela and Iran, which produce very heavy oil. Russia’s crude is moderately “heavy” and well suited to refining diesel and home heating fuel. US and Saudi crude is light and needs to be combined with heavier distillates to make some of the desired end products like diesel (yes, this is a simplification but will do for this purpose). The charm offensive to other oil producers isn’t going very well. For instance, Biden had planned to go to the Middle East in June and among other things, sit down with Saudi Crown Prince Mohammed bin Salman. That’s now planned for July, allegedly by Biden due to concerns about the stability of the Israel government and a busy calendar of June visits to Europe. Alexander Mercouris claims it was the Saudis that pushed the meeting back (see here starting at 4:06).

Mind you, if the prospects aren’t so hot for the US, they are even worse for Europe. The latest round of EU sanctions proposed to cut oil imports from Russia by 90% by late this year, with pipeline oil the main carve-out. No one with an operating brain cell believes this is achievable, even with aggressive stockpiling, unless the northern countries are willing to do serious and irreversible harm to industry, or alternatively, let non-trivial numbers of citizens freeze to death.

Some contend that Russia will be brought to heel by the difficulty of unloading more oil as the Europeans wean themselves off Russian supply. It’s more realistic to assume that it will simply be laundered through intermediaries, with Europe paying even more as a result.

And the threat of barring insurance on Russian oil cargoes also seems overestimated. The US and Europe are not the only places in the world capable of issuing guarantees. Russia itself could. So could Middle Eastern countries, which are now becoming more important financial centers as a result of nervous billionaires, and even some countries, shifting holdings there after the US/EU theft of Russian assets (they claim they are merely frozen, but if you think Russia is ever getting them back, I have a bridge I’d like to sell you).

If the West tries to impose secondary sanctions on non-Russian insurers, another Russian gambit could be to sell discounted oil (below its China-India price but still above the US-EU bid) on a humanitarian basis to countries in dire energy straits or facing debt crises, like Sri Lanka.

And the idea the author Irina Slav posits at the end, that the US may get the relief it needs from an OPEC+ production increase, is a misconstruction. The Saudi offer was largely optical. It was largely conditioned on an output gap elsewhere and amounts to only moving production forward by a few weeks.

I strongly suspect that even if the US and EU get as far as formalizing this proposal, it will be quickly shot down by a sharp-tongued senior Russian official like Dimitry Medvedev. Another way to ridicule this plan is to say Russia would entertain it if the West withdraws all of its sanctions.

By Irina Slav, a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. Originally published at OilPrice

  • The United States has a new plan to curb Russia’s oil revenue.
  • The U.S. is in talks with European allies over a potential price cap on Russian crude.
  • The goal is to keep Russian oil flowing while limiting Moscow’s energy revenues.

The U.S. is discussing with its European allies a price cap on Russian oil. The goal is to keep Russian oil flowing into international markets but curb budget revenues from it to discourage Russia from continuing the war in Ukraine. Theoretically.

The situation is not dissimilar to wanting to eat your cake and have it, too. On the one hand, both the U.S. and Europe, suffering the most severe consequences of sanction action so far, are aware that banning Russian oil from international markets would hurt them even more.

On the other hand, paying for Russian oil at market prices is not a palatable option because oil—and gas—export revenues make up a solid portion of Russia’s budget, and that budget includes defense spending, and much of that defense spending is going into what Russia calls its special military operation in Ukraine, which the West calls an unprovoked war.

U.S. Treasury Secretary Janet Yellen put it rather bluntly earlier this week: “I think what we want to do is keep Russian oil flowing into the market to hold down global prices and try to avoid a spike that causes a worldwide recession and drives up oil prices,” she said as quoted by the Wall Street Journal. “But absolutely the objective is to limit the revenue going to Russia.”

One might wonder where the concept of the free market went, but in truth, the concept of the free market has been quite dead for a while now. The question is whether the idea that the U.S. and the EU have about an oil price cap could work. In other words, would Russia accept such a move?

According to common sense, it would hardly welcome the idea of having a price ceiling imposed on its export oil cargos. According to the former chief economist of the European Bank for Reconstruction and Development, Sergei Guriev, “Yes, Putin could refuse to sell oil at this price. But, given that he is already desperate enough to sell to China and India at steep discounts, and today’s energy prices far exceed production costs, this seems unlikely.”

Indeed, Russian oil is trading at a discount of some $30 or more to Brent crude. Whether there is desperation in the Russian oil equation is difficult to say, if we put emotions and wishes aside. It is clear Russia knew it would have to redirect flows to Asia from Europe should the latter try to punish it for its actions in Ukraine—and it was prepared to do so.

It is also clear, or at least it should be, that Russia cannot just redirect all the oil and fuel flows that currently go into Europe to India and China, at least not fast. What this suggests is that Russia may well be prepared to suffer some revenue pain while the redirection proceeds.

Also, Russia tends to budget on the basis of quite low oil prices. For last year, for instance, it budgeted for $45 per barrel of Brent crude. Its actual oil revenues last year exceeded initial expectations by more than 51 percent. For 2022, Moscow budgeted for Brent at $44.20 per barrel.

So, as Guriev notes, even with a price ceiling of $70 per barrel, Russia would be making a lot more from the sales of its oil than it budgeted for. China and India would only be too happy to pay even less for Russian oil. Yet the question remains whether Russia would be on board with the idea of having its opponents in this war tell it at what price to sell its crude.

Until the ball goes to Russia’s court, however, the U.S. and the EU would have to figure out how to enforce a price cap if they agree on it. One way, according to the WSJ report, is to use the insurance industry and make it only insure Russian oil cargos below the price cap. Another is to impose secondary sanctions on Russian oil buyers, but that would have potentially unpleasant diplomatic consequences.

The idea of a price cap on crude, not just Russian, was first floated in Europe earlier this year by Italy’s Prime Minister Mario Draghi. In May, following a meeting with the U.S. president, Draghi said both he and Biden were “dissatisfied” with the structure of global oil markets and had talked about setting a price cap on both oil and gas.

“The idea is to create a cartel of buyers, or to persuade the big producers, and Opec in particular, to increase production, which is perhaps the preferred path,” Draghi said at the time, as quoted by the Financial Times. “On both paths, there’s a lot of work to do.”

Perhaps now that OPEC+ agreed to pump more oil, theoretically, this plan would be put on the backburner. A buyers’ cartel is certainly not something you’d want to push into OPEC’s face right when you urgently need more oil.

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  1. Julian

    This is something that only a russophobe could come up with. I see no other explanation. It is as ridiculous as burning down a house ’cause lil’ spider showed up. Frighteningly ridiculous. People with nuclear red button with an actual mental health issue regarding another group of people with a nuclear red button…

  2. OnceWereVirologist

    Now hear me out, I AM NOT a crackpot. What if we capped the price of Russian oil to $45 ? After all, that’s what they budgeted for ! If we’re assuming that they are willing to fold at $70, why not really swing for the stands ?

    1. OIFVet

      You are obviously a Putin lover! Any loyal citizen of Oceania must demand that Eastasia should pay us to accept its oil! /snark :)

    2. Dave in Austin

      This might work if it is paid in Rubles at the three-month-old panic rate. Or maybe we could use some Fungible Non-Tokens (FNTs) or a few of the 500 million Mark 1924 German Reich notes I have on my wall. Will they take Confederate bonds at a bit of a discount? What about a Promisory Note from Robert Vesco?

    3. JTMcPhee

      Yeah, hell, why not do what the Combined West has already done with the seizure of Russian assets, demand that Russia just GIVE us its petro products? For free? Why should we, as racketeers with nuclear weapons, pay ANYTHING for what after all, per our world view, is OUR OIL? The damn Rooskies should be PAYING US! to accept the oil! And how dare the Rooskies dare to invoke the free market idea of willing buyer and willing seller to stand in the way of our manifest destiny? /s

      Seriously of course, how would the Arrogant West even try to enforce that kind of ripoff? Blow up the pipelines? Sink the tankers? Russia has opted out of SWIFT and written off the hundreds of billions of earned dollars the Arrogant West has stolen already. “Russia and China (and India?) may not stand shoulder to shoulder yet, but they do stand back to back…” 18% vs 82% — unsustainable idiocy will not sustain…

    1. SocalJimObjects

      It’s all optics remember? The West can not be seen as giving up even an inch even if that inch really belongs to someone else i.e. Ukraine.

      1. Michaelmas

        It’s all optics. And it would amount to a public admission that the US’s and the EU’s Dunning-Kruger elites are the arrogant, but completely incompetent buffoons that they are.

    2. flora

      An aside:

      tsk. Brandon has a plan to reduce pump prices by 10 cents a gallon – increase the ethanol concentration in the gas. This will, of course, take more corn as grain off the food market and feed market driving up food costs and feed costs. But whatever. (Also, don’t use the increased blend – E15 in a car made before 2001. Ethanol absorbs water and too much can wreck old engines.) Brandon has a plan. What could go wrong? / ;)


      1. SocalJimObjects

        The mid terms are coming, and Congress will have to pass spending bills for the next year before then. Janet Yellen who is now Treasury Secretary is probably thinking that inflation will skyrocket even more, hence this hair brained idea of Russia helping Make America Great Again.

        Build Back Better, paid by Russia does have a nice ring to it.

      2. Glen

        This will also cause havoc with all modern engines unless the vehicle is rated to use Flex Fuel.

      3. drumlin woodchuckles

        Is the corn grown for ethanol even fit for feed? ( Let alone food?) Or is it a special sub-optimal sub-garbage anti-nutritional hybrid specially bred for the subsidized force-mandated ethanol “market”?

  3. The Rev Kev

    This stupid idea has been circulating in one version or another the past few days. The first version, as mentioned, was where the US would form a cartel of oil buyers and they would set a maximum price that they would pay for oil. Sort of like a reverse OPEC. I don’t think that the laws of supply and demand work that way. Then SecTreas Janet Yellen was saying that she wanted the west to buy Russian oil but that she did not want Russia to profit from it. All this would need the cooperation of OPEC itself but I think that OPEC would see that this would lead to the dissolution of OPEC itself so they are probably not a fan of this idea. Of course the west is still receiving Russian oil, including the US, and none of these countries would have a working economy without Russian oil. At the moment a lot of Russian oil goes to India where it is magically turned into Indian oil and sold back to the west so another idea has been floated that the west take no oil from a refinery which also takes Russian oil. I think that if the west pushes Russia and OPEC too far, that the later will announce Oil Embargo 2.0 for the period of one month as a demonstration of market realities.

    1. JTMcPhee

      I have not seen any articles (surely there are some, already) about the advent of the likely vastly profitable and demonstrably “inefficient” middleman in the origin-washing of Russian petroleum. Might one offer per adventure that the middlemen are “whales” in the Looting Sector who are applying bribery and coercion to put these policies forward?

  4. Pat

    America apparently no longer has a real professional class. Oh sure they have people who get paid for things, but expertise is in short supply. Only a fantasist could think this was remotely possible. I realize that much of our bureaucracy is now in panic mode, but they may as well be praying to Saint Alan Greenspan and expecting a miracle where their derrières escape from this quagmire created by their numerous delusional and stupid decisions.

    Saint Al will make OPEC, Venezuela and Iran America’s dutiful slaves, have Ukraine win, and see that Russia comes crawling back to America with Putin’s head on a platter and determined to put a DC puppet in his place. While he is at, the drought will be over, harvests will be record breaking and workers will be hurrying back to the office for reduced wages and grateful to the billionaires in charge.

    That scenario is about as realistic as most coming out of America’s brain trust.

    1. digi_owl

      Pretty much. Best i can tell, congress is packed with lawyers and economists these days. And their aides are mostly media and “social science” that are there because the know someone that know someone from ivy league.

      Congress is turning into a forbidden city.

  5. Bugs

    This sounds like what Lambert calls “West Wing Brain” – they’re so wrapped up in their narrative of the essential goodness of the exercise of (legitimate or not) American power that allies would automatically cry “eureka” at any convoluted market-based anti-Russia doohickey they came up with.

    This particular administration has the worst policy apparatus in a long while. It’s not just incompetent but so overly sure of its genius that it breaks anything it touches. I’m almost willing to say it’s worse than Shrub’s first term but we’re not quite there yet.

    1. digi_owl

      Sadly this time round i fear any Able Archer like event will turn nuclear rather than shock some kind of enlightenment into the people in charge.

  6. Thuto

    Absurdity ad infinitum from the folks in mission control in the West. First they knocked the feet from under the pedestal property rights stood on to seize Russian assets without due process, and under the flimsiest if pretexts, now they want to put the oil market in a headlock and disabuse the remaining free market fundamentalists of the belief in the sanctity of their holy cow. It’s not even worth plotting a flight path for this hare brained scheme because I don’t expect it to take off, even if it does by some miracle it will crash just off the runway.

    1. John Steinbach

      Watched 45 seconds to get the drift. Putin is hell-bent on restoring the Russian Empire and pays for it by selling gas & crude. Very slickly produced with background music & professional announcer. Russia, Russia, Russia!/Putin=Hitler on steriods.

      1. Oh

        I already figured out that the piece would be propaganda from our bird brains in the admnistration and did not click on the link. Thanks for confirming my suspicion.

  7. thoughtful person

    This is a revealing proposal (that the US and EU could dictate Russian crude prices, globally).

    I guess the people making this proposal think: “We took Iranian and Venezuelan crude off the market by sanctions. We took Libyan crude off by fomenting civil war and creating a failed state. We can dictate who participates in *our* global market for oil.”

    So they got annoyed with Russia and tried sanctions and bans on Russian oil. Problem: Russia is a lot larger oil producer than those “pariah states” mentioned previously. Result so far seems to be massive economic damage. Result this Winter when the populations of the USA/EU are freezing and/or going broke? Massive political damage.

    You’d think that at least a couple of these leaders might have thought about the likely results of their policies before they acted?

    Is there something else? Some other reason to crash the global economy, not to mention the famines, frozen/broke citizens etc?

    1. NotTimothyGeithner

      Besides Russia’s size, the US was much stronger when it took those countries off the market. Matt Stoller has noted the manufacturing declines after 2000 were staggering, but today, we have the f35 with parts made in China, and the same marvel 3 times a year, with plenty of input to make them suitable for Chinese releases.

      I’m reminded of Carl Sagan’s point about bad ideas dying out. We simoly haven’t removed enough bad actors but rewarded them. Biden is president after all. The bipartisan consensus of the last 40 years isn’t going to learn. Not that the GOP has had a good person in 130 years, but the New Democrats have demonstrated their ideology and greed are the only things they are committed to. They can’t conceive of responsible government or accountability.

      1. lance ringquist

        thats right, nafta billy clinton was advertising on yahoo again, come to my seminars and learn all that i know. the longer the nafta democrats skate on what they did to us and the world, the harder it will be to reverse the immense, incredible damage to america and the world they did.

        the people who came into power in 1993, were carefully groomed and indoctrinated in a form of economics where pink elephants were flying, amungst butterflies that populated green grass and frolicked with humans, as said humans looked to the sky and saw gold raining down on the world, being dropped by flying pink elephants.

        from day one nafta billy clinton hit the ground running hard to over turn the new deal, and trumans GATT.

        these towering intellectual midgets never had to deal with the cold war, nor the sovereignty of anyone else.

        they were the hammer, everything a nail. if yugoslavia did not want to join the E.U., well just bomb them, that will soften them up.

        so like all of these articles lately people are surprised and bewildered about the actions of the free traders. and if you just started to pay attention, its outrageous policies that make no sense at all,






        just a sample of the lunatic polices that got a hold of the world in 1993.

        these carefully groomed, educated and indoctrinated feverish pink elephant believes most likely have never worked a real job in their entire lives.

        today those disastrous criminal polices that they spawned since 1993 collapsed under their own fantasies weight.

        they know nothing else, they are bewildered.

        the free trades have compartmentalized humans, black, brown and yellow are to be the sweaters making things for the exceptional white americans,

        sub humans like russians need to be eliminated, or pulverized into submission.

        working americans are merely deplorable, and expendable, they never learned how to code.

        the free traders are just doing what they were groomed to do. the rest of us see the truth, they are looney and dangerous.

        they have to pay a price, and must not be left in society, otherwise anything we try, will fail.

    2. digi_owl

      Yet they walk on eggshells with the Saudis, while there are likely more than enough western forces down there to snag control of the oil fields if so desired.

  8. NN Cassandra

    I don’t really understand this little underlying scheme of depriving Russia gov of USD/EUR so it can’t finance its war and whatever else. Russia budget and arms manufacturers run on roubles, Putin doesn’t need dollar or euros to finance them. He can use these to purchase foreign imports, but thanks to various sanctions his actual buying options seems to be limited, especially in relation to arms dealing, which was banned back in 2014. So how is this supposed to work in reality? Now Russia is running trade surpluses, which means they export more goods than they import, but the collective West is saying they don’t want this excess oil and gas Russia is offering. Do they hope to reverse this situation until it’s Europe who sends more goods to Russia than it receives back?

    1. eg

      This is precisely my puzzlement — why would Russia accept dollars in payment (regardless of price) when the US has already demonstrated that they can seize Russian dollar holdings. Would the Russians be receiving ships full of pallets of cash to be used for purchase of imports from third parties black market style?

  9. Lex

    So the brain trust of the west completely misreads the discounts for China and India? Yes, Russia needs to move volume but isn’t the discount a statement of behavior towards “friendly countries”? It is funny* that the west is angry someone else gets a discount. Almost as funny* as crackpot plans to demand a discount for itself too, because it cannot afford the prices it caused.

    *funny in a Gogol “and I shall laugh my bitter laugh” way, not a hahahaha way, of course.

    1. Alex Cox

      Thank you, Lex! When I say, this is funny… My wife responds, oh no! Thanks to your comment I realise I must be channeling Gogol. That quote is apparently carved on his gravestone. More stuff to read…

  10. dftbs

    I have to really question the reasoning behind characterizing Russian oil sales to China or India as “discounted”. This discount is measured versus the Brent market price, which is determine at a Western exchange (ICE). The Russian’s don’t have direct access to this exchange, and market participants in this exchange don’t have direct access to Russian oil. Russia is the world’s second largest oil producer, taking their output away from a market via regulations would mean that this market’s price is not the market clearing price, but rather a price with a steep regulatory premium attached. Moreover, Russian sellers are not at an operating loss, so they are selling at their producer determined clearing price. It also seems that the Russians have been able to capture a significant amount of the upward “delta” of this regulatory premium using Asian intermediaries.

    Final note, and one that I think is the ultimate clarification with regards to “discounted” or “premium”. After the West seized Russian foreign reserves, Western currencies have negative utility to the Russian’s. That is, even the dollars that are still presently exchanged for Russian oil are being handled like hot potatoes and exchanged for safer currencies. Selling Russian oil to Chinese or Indian sellers allows Russian producers to bypass a large portion of this risk. It’s embarrassing that a former Fed Chair and current Sectreas thinks the Russian’s would willingly take on more “unhedge-able” risk (seizure) and look for ways to sell more to the West.

    To quote a great American: That’s it, man. Game over, man. Game over! -Private First Class William L. Hudson, USCMC

  11. orlbucfan

    What a load of the usual DNCrooked first-class bull (family blog) and stupidity. My family is prepared for the $10/gallon price gouging which is coming. I notice that all the bought off congress yahoos are doing their usual nothing about the growing solar, wind and other forms of alternative safe energy. A POX on all of them, both national and international!

    1. tegnost

      Thank you orlbucfan,
      I’ve been thinking the last few days since I paid 6.56/gallon that we’d be seeing $10 as it’s still june and there is no sign this conflict changes unless it changes for the worse.

      I notice that all the bought off congress yahoos are doing their usual nothing about the growing solar, wind and other forms of alternative safe energy.

      They are so effing arrogant, and so very accustomed to screwing the average american and cashing in with insider trading all the while considering themselves indispensable and exceptional.
      They’re crashing it now, in real time.

      1. Oh

        Congress, Bidet and the rest of ’em are hand madens to the Petroleum Lobby, which is loving the high price. This BS is for the fools to believe while these guys are laughing all the way to the bank. Hey Janet, kiss off!

    2. wilroncanada

      A POX on those monkeys, eh, orlbucfan? It’s all merely further proof, as if readers of this blog need any more, that the US, which has forever prided itself on having more of everything, has two idiot fringes, called democrats and republicans, which take turns mis-leading the country into the dirt.

  12. cristobal

    This is why Janet gets paid the big bucks! A perfect example of the anthropologist David Graeber´s theory of Bullshit Jobs. She has to come up with SOMEthing!!

    1. John k

      And anything dc would like is magical wishing.
      So why not free? We already got 300b of free stuff when we stole their credits, that’s a price we can live with.

  13. danpaco

    Am I missing something?
    They only need to convince India and China to not spend more than $70/ barrel to achieve what they’re looking for. That’s assuming we have the diplomatic ability to make it happen.
    Maybe the US is looking for the discount as well.
    Our leadership class has lost their fracking minds!

  14. super extra

    I read a lot of history for recreational purposes (huge boring nerd) and one of the only ways I was ever able to reconcile the imperial histories of Britain and the US without collapsing into a foaming rage every other chapter was to see the continuation of the role of the British navy in enforcing the opening of markets for the East India Company ~> US manifest destiny and destruction of Latin American leftists and resource sovereignty. My mental shorthand for this framework is the field of red and white stripes that make up but the East India Company flag and the US flag. When I see a western politician presenting a ‘solution’ to the periphery, I think of those flags and wonder if they truly understand what they’re saying or if the hundreds of years of colonial domination and protestant othering of the non-believers have created a new (old?) type of parasitic host. They can’t step outside of the paradigm, they are a creature of it, their view is entirely framed by it. It isn’t merely just stupidity, stepping out of the framework means recognizing all they did to this point was worthless. The viewpoint must be preserved even as it is falling apart.

  15. chris

    Heating oil is now 6.25$/gal in my area. Propane is up a lot too but I don’t know by how much. I am getting all my winter heating supplies ready now before the price increases become even worse. But how many others can afford to do that at these rates?

    Plenty of people in Pennsylvania still use heating oil. As do those in Maine, Vermont, Massachusetts, New Hampshire, New Jersey, New York… the list goes on and on. Are we really going to see Team Blue commit public suicide by timing high oil prices in important states before what they say is a critical midterm election? I can’t believe these people are that dumb. I mean, write an executive order to temporarily suspend the Jones act so we can get what supplies we have to places that need it more efficiently! Use the rules from the 1970’s era crisis and play hardball with the oil companies. Tell them you can’t sell your product overseas! Use eminent domain to seize the idled refineries! Do something! I can’t imagine what will happen if we combine all the issues we have right now with a well armed population that is starving and cold.

  16. Glen

    It must be difficult for Janet to transition from being head of the Federal Reserve to Treasury Secretary. The Fed is completely structured so that if Wall St pump’n’dumpers, or giant corrupt banks, or major failed corporations are in trouble, she could push the Fed’s magic button (from the comfort of her home office) and instantly trillions of dollars were made available to her constituents (customers, donors, owners, hard to quite capture that relationship, except regulators, no definitely NOT). Once you become Treasury Secretary, you have to deal with, gasp, the horror, average Americans.

    So here’s some helpful hints for Janet to help her understand her new job:

    Americans care way more then she can ever understand about the price of gas coming out of the pump at the local gas station. They use it to do things like “work” and “shop”. Americans may, in general, have a problem locating Russia on a map, and certainly much less understanding about how wrecking Russia is gonna drop gas prices (I do too on that one.)

    Her boss, the President, has these things coming up where average American provide input on how well her boss is doing “running the country”, she may never have heard of it, it’s something the lower class people do called “voting in the midterms”. She needs to help him “win the vote” (look it up Janet, there is probably a Wikipedia page explaining it.)

    She might actually have a better means to control gas prices by doing something previous Presidents have done, and that is set a price cap on American oil suppliers. This would almost immediately drop gas prices at the pump, and allow her boss to do better in the midterms.

    Janet, I hope this helps clarify what we’re trying to do here.

  17. Paul Damascene

    Important issue and good commentary. A frequently overlooked issue raised at The Saker is that Europe’s oil-embargo stylings quite fecklessly presume oil to be fungible, when it emphatically is not. Europe’s industries and even more so its refineries are tuned to a steady supply of particular Russian blends. The retooling of Europe for a different, less reliable, more variable oil supply is not far short of rolling out the infrastructure for Fossil Fuels 2.0 while trying to keep industry & transport viable while attempting to finance an accelerated renewables shift with head-spinning levels of new debt in cratering economies.

    1. Irrational

      Yves has made this point at length too.
      Just have to add that I think it hilarious that the free marketeers don’t understand that Russia, in a free market, can just look for another buyer..!
      As usual: great intro, great article.
      It might be less fun here in Europe this winter!

  18. drumlin woodchuckles

    The next step after suggestions like this will be for the DC FedRegime to tell the RussiaGov that ” its time to bury the hatchet and let bygones be bygones”. The RussiaGov will probably watch and wait for a mass-replacement of tens of thousands of personnel at all top and mid levels of the DC FedRegime goverstructure.

    The RussiaGov will not just simply let the current generation of DC FedRegime players consider the hatchet to be buried, bygones all gone by, and back to business as status quo ante usual.

  19. Skip Intro

    This strategy misses the point. The problem is gasoline prices. Drivers should just refuse to pay more than $1.99!

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