A cap on Russian oil prices will be crucial to help lower inflation as US consumer inflation soared to a 40-year high of 9.1% this week, US Treasury Secretary Janet Yellen said Thursday.
Before the meeting of the Group of 20 finance ministers and central bank governors in Bali, Yellen said efforts should be made to contain two major economic consequences of the crisis between Russia and Ukraine: high fuel prices. and the rising food insecurity that is sweeping the US and worldwide.
High energy costs contributed heavily to the spike in US inflation this week, she added.
“We see negative spillovers from [the Russia-Ukraine] war in every corner of the world, especially regarding higher energy prices and increasing food insecurity,” Yellen said.
She said the US will continue talks with other countries to see “what we can do together to help others around the world affected by the war in Russia”. It includes tackling food insecurity and designing and implementing a price cap for Russian oil, she added.
“A price cap for Russian oil is one of our most powerful tools to address the pain Americans and families around the world are now feeling at the gas pump and supermarket. A cap on the price of Russian oil will deprive Putin of revenue from his war machine has.”
Shell’s Vito Offshore Oil Platform docked at Kiewit Offshore Services on Wednesday, April 6, 2022 while under construction in Ingleside, Texas, USA.
Eddie Seal | Bloomberg | Getty Images
While Washington bans Russian oil and European countries try to reduce the use of Russian oil, oil prices have risen. The price of crude oil soared above $120 a barrel in March after the war between Russia and Ukraine started.
Economists have warned that further bans could push prices up to $175 a barrel.
The price cap mechanism involved the US and other countries forming a cartel to buy Russian oil at a price low enough to keep Russian oil production profitable and supply up to par, but at the same time prevent Russia from financing its war in Ukraine. .
“We will build on the historic sanctions we have already put in place that will make it harder for him to wage his war or grow his economy,” Yellen said.
Russia has been silent on the proposal, while other countries still buying Russian oil, such as China and India, have not weighed in.