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Design and implementation of the price cap on Russian oil exports

Johnson, Simon; Rachel, Lukasz; Wolfram, Catherine; (2023) Design and implementation of the price cap on Russian oil exports. Journal of Comparative Economics 10.1016/j.jce.2023.06.001. (In press). Green open access

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Abstract

Basic economics teaches that price caps are bad – limiting the price of a good distorts demand and discourages producers from supplying the market. So why did the Biden Administration, led by Janet Yellen, the consummate economist, champion a price cap on oil from Russia after it invaded Ukraine in 2022? The answer is that this price cap, implemented for crude oil in December 2022 and oil products in February 2023, differs significantly from the standard cap discussed in introductory economics classes. This paper explains these differences and describes the first six months this policy has been in existence. We provide background on Russian oil trade and describe the goals, structure, enforcement and economics of the price cap. We review the main concerns and contrast them with the outcomes observed to date.

Type: Article
Title: Design and implementation of the price cap on Russian oil exports
Open access status: An open access version is available from UCL Discovery
DOI: 10.1016/j.jce.2023.06.001
Publisher version: https://doi.org/10.1016/j.jce.2023.06.001
Language: English
Additional information: © 2023 The Author(s). Published by Elsevier Inc. on behalf of Association for Comparative Economic Studies under a Creative Commons license (http://creativecommons.org/licenses/by/4.0/).
Keywords: Oil, Price cap, Sanctions, War, Energy
UCL classification: UCL
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/10174498
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