The Impact of the 2022 Oil Embargo and Price Cap on Russian Oil Prices.

This article analyzes the effects of the 2022 oil embargo and the G7-imposed price cap on Russian oil prices and exports following Russia's invasion of Ukraine. It finds that the embargo caused Russia to accept a significant discount—about $32 per barrel on Urals crude by March 2023 compared to January 2022—roughly half of which is attributable to higher transportation costs from redirecting exports to more distant markets like India, and the remainder explained by increased monopsony market power of India and China in purchasing Russian oil. The study concludes that the price cap, set at $60 per barrel for Russian crude shipped with Western maritime services, had negligible direct impact on Russian export prices or revenues in 2023, serving mainly a political role by allowing continued use of Western shipping services and preventing a global oil price surge. A calibrated global oil market model supports these findings, showing that market segmentation and transportation costs, rather than the price cap or alleged fraudulent shipping charges, primarily drove the observed price discounts. The article also finds no empirical evidence that the oil market anticipated the price cap in a way that affected global oil prices prior to its implementation.