The G-7 may cap Russia’s oil price — but it won’t dent Moscow’s war chest, analysts say
Picture taken on May 3, 2022 shows a general view of Slovakia’s largest mineral oil refinery Slovnaft in Bratislava, Slovakia. (Photo by JOE KLAMAR / AFP)
Joe Klamar | Afp | Getty Images
The Group of 7 nations are in talks to cap Russian oil at $65 and $70 a barrel — but analysts say it likely won’t have a significant impact on Moscow’s oil revenues even if it’s approved.
Prices at those levels are close to what Asian markets are currently paying Russia, which are at a “big discount,” said Wood Mackenzie’s vice president of gas and LNG research, Massimo Di Odoardo.
“Those levels of discounts are certainly in line with what the discounts already are in the market … It’s something that doesn’t seem, as it is placed, like it’s going to have any effect [on Moscow] whatsoever if the price is so high.”
Russia has threatened to it will not supply oil to countries setting and endorsing the price cap.
“Given Russian oil (Urals) is trading at $60‑65/bbl, the proposed price cap is already compliant under prevailing market conditions,” said Vivek Dhar, Director of Mining and Energy Commodities research from Commonwealth Bank of Australia.
In a note on Thursday, he said that current Russian oil shipments face minimal disruption from the European Union denying shipping and insurance services.
He agreed that the discussed price cap won’t make much of a dent or deter Moscow in its war against Ukraine.
“Russia’s seaborne oil exports have increased to China, India and Turkey at the expense of advanced economies following the Ukraine war,” he added.
In fact, he said the price cap discussed was higher than markets were expecting.
“Oil prices finished lower overnight after the EU discussed a price cap on Russian oil between $US65‑70/bbl, a higher price range than markets expected and at levels that will reduce the risk of disruptions of EU sanctions on Russian oil shipments,” Dhar said.
There was similar skepticism over the EU’s proposed cap on natural gas prices. Several EU member states locked horns over the effectiveness of capping prices at 275 euros per megawatt hour, with some saying it’s not realistic to keep gas prices at such high levels for so long.
The bloc is seeking to stop gas prices from soaring sky-high as consumers are already struggling with rising cost-of-living.
G-7 policymakers have a tough balancing act to tread.
It seems to me like [the G-7] will err on the side of caution — setting it high rather than low to avoid worsening the inflationary spiral.
Pavel Molchanov
Energy analyst at Raymond James
If prices are set too high, they will be meaningless and risk having no impact on Russia — but if the price cap is too low, it could lead to a physical reduction in the supply of Russian oil onto the global market, said Raymond James’ energy analyst Pavel Molchanov.
A lower price cap “means more inflation, more consumer unhappiness, and more monetary tightening,” Molchanov pointed out.
“It seems to me like [the G-7] will err on the side of caution — setting it high rather than low to avoid worsening the inflationary spiral.”
Last week, official data showed U.K. inflation jumped to a 41-year high of 11.1% in October, higher than expected, as energy prices, among other factors, continued to squeeze households and businesses.
Downside risks to current forecasts
If EU members agree to the proposed cap, Dhar expects the price of oil to fall below $95 per barrel for the last quarter of 2022.
Oil prices were fractionally higher on Friday afternoon Asia time. Brent crude futures inched higher by 0.35% to stand at $85.64 per barrel, while U.S. West Texas Intermediate futures climbed 0.55% to $78.37 per barrel.
“Our price forecast assumes EU sanctions accompanied by a price cap on Russian oil will result in enough supply disruption to offset ongoing global growth concerns.”
The European bloc has imposed multiple rounds of sanctions against Russia since since Moscow began its unprovoked war on neighboring Ukraine in late February.
Earlier this week, Goldman Sachs lowered its oil price forecast by $10 to $100 per barrel for the fourth quarter of 2022, citing rising Covid concerns in China and lack of clarity over the Group of Seven nations’ plan to cap Russian oil prices.
Wind energy powered 20% of all electricity consumed in Europe (19% in the EU) in 2024, and the EU has set a goal to grow this share to 34% by 2030 and more than 50% by 2050.
To stay on track, the EU needs to install 30 GW of new wind farms annually, but it only managed 13 GW in 2024 – 11.4 GW onshore and 1.4 GW offshore. This is what’s holding the EU back from achieving its wind growth goals.
Three big problems holding Europe’s wind power back
Europe’s wind power growth is stalling for three key reasons:
Permitting delays. Many governments haven’t implemented the EU’s new permitting rules, making it harder for projects to move forward.
Grid connection bottlenecks. Over 500 GW(!) of potential wind capacity is stuck in grid connection queues.
Slow electrification. Europe’s economy isn’t electrifying fast enough to drive demand for more renewable energy.
Brussels-based trade association WindEurope CEO Giles Dickson summed it up: “The EU must urgently tackle all three problems. More wind means cheaper power, which means increased competitiveness.”
Permitting: Germany sets the standard
Permitting remains a massive roadblock, despite new EU rules aimed at streamlining the process. In fact, the situation worsened in 2024 in many countries. The bright spot? Germany. By embracing the EU’s permitting rules — with measures like binding deadlines and treating wind energy as a public interest priority — Germany approved a record 15 GW of new onshore wind in 2024. That’s seven times more than five years ago.
If other governments follow Germany’s lead, Europe could unlock the full potential of wind energy and bolster energy security.
Grid connections: a growing crisis
Access to the electricity grid is now the biggest obstacle to deploying wind energy. And it’s not just about long queues — Europe’s grid infrastructure isn’t expanding fast enough to keep up with demand. A glaring example is Germany’s 900-megawatt (MW) Borkum Riffgrund 3 offshore wind farm. The turbines are ready to go, but the grid connection won’t be in place until 2026.
This issue isn’t isolated. Governments need to accelerate grid expansion if they’re serious about meeting renewable energy targets.
Electrification: falling behind
Wind energy’s growth is also tied to how quickly Europe electrifies its economy. Right now, electricity accounts for just 23% of the EU’s total energy consumption. That needs to jump to 61% by 2050 to align with climate goals. However, electrification efforts in key sectors like transportation, heating, and industry are moving too slowly.
European Commission president Ursula von der Leyen has tasked Energy Commissioner Dan Jørgensen with crafting an Electrification Action Plan. That can’t come soon enough.
More wind farms awarded, but challenges persist
On a positive note, governments across Europe awarded a record 37 GW of new wind capacity (29 GW in the EU) in 2024. But without faster permitting, better grid connections, and increased electrification, these awards won’t translate into the clean energy-producing wind farms Europe desperately needs.
Investments and corporate interest
Investments in wind energy totaled €31 billion in 2024, financing 19 GW of new capacity. While onshore wind investments remained strong at €24 billion, offshore wind funding saw a dip. Final investment decisions for offshore projects remain challenging due to slow permitting and grid delays.
Corporate consumers continue to show strong interest in wind energy. Half of all electricity contracted under Power Purchase Agreements (PPAs) in 2024 was wind. Dedicated wind PPAs were 4 GW out of a total of 12 GW of renewable PPAs.
Read more: Renewables could meet almost half of global electricity demand by 2030 – IEA
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In the Electrek Podcast, we discuss the most popular news in the world of sustainable transport and energy. In this week’s episode, we discuss the official unveiling of the new Tesla Model Y, Mazda 6e, Aptera solar car production-intent, and more.
The show is live every Friday at 4 p.m. ET on Electrek’s YouTube channel.
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The Chinese EV leader is launching a new flagship electric sedan. BYD’s new Han L EV leaked in China on Friday, revealing a potential Tesla Model S Plaid challenger.
What we know about the BYD Han L EV so far
We knew it was coming soon after BYD teased the Han L on social media a few days ago. Now, we are learning more about what to expect.
BYD’s new electric sedan appeared in China’s latest Ministry of Industry and Information Tech (MIIT) filing, a catalog of new vehicles that will soon be sold.
The filing revealed four versions, including two EV and two PHEV models. The Han L EV will be available in single- and dual-motor configurations. With a peak power of 580 kW (777 hp), the single-motor model packs more power than expected.
BYD’s dual-motor Han L gains an additional 230 kW (308 hp) front-mounted motor. As CnEVPost pointed out, the vehicle’s back has a “2.7S” badge, which suggests a 0 to 100 km/h (0 to 62 mph) sprint time of just 2.7 seconds.
To put that into perspective, the Tesla Model S Plaid can accelerate from 0 to 100 km in 2.1 seconds. In China, the Model S Plaid starts at RBM 814,900, or over $110,000. Speaking of Tesla, the EV leader just unveiled its highly anticipated Model Y “Juniper” refresh in China on Thursday. It starts at RMB 263,500 ($36,000).
BYD already sells the Han EV in China, starting at around RMB 200,000. However, the single front motor, with a peak power of 180 kW, is much less potent than the “L” model. The Han EV can accelerate from 0 to 100 km/h in 7.9 seconds.
At 5,050 mm long, 1,960 mm wide, and 1,505 mm tall with a wheelbase of 2,970 mm, BYD’s new Han L is roughly the size of the Model Y (4,970 mm long, 1,964 mm wide, 1,445 mm tall, wheelbase of 2,960 mm).
Other than that it will use a lithium iron phosphate (LFP) pack from BYD’s FinDreams unit, no other battery specs were revealed. Check back soon for the full rundown.
Source: CnEVPost, China MIIT
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