Oil prices are approaching $100 per barrel, which is yet another setback in the Fed’s fight against inflation. However, someone is pleased with this price, and that is Russia. Oil prices have recently risen due to supply cuts from major producers like Saudi Arabia and Russia.
The reduction in production has led to an increase in oil prices, which have risen by more than 10 percent this year, benefiting Russia, according to an analysis conducted by the FT.
The FT analysis showed that more than three-quarters of oil exported by sea from Russia has ‘gone’ without Western insurance, a 50 percent increase compared to the spring of this year, reported the FT citing data from Kpler and insurance companies.
Russia’s avoidance of using Western insurance for oil exports is an important development as it is one of the key tools used to enforce the G7’s price cap on Russian oil at $60 per barrel. Russia’s ability to ship such crude oil without Western insurance suggests that it could now sell crude oil above the aforementioned price cap of $60.
Higher oil prices have increased Russia’s energy export revenues. The Kremlin collected $17.1 billion from crude oil exports in August – compared to $15.3 billion in July, according to data from the International Energy Agency.
In fact, Russia could have earned more than one billion dollars just by increasing oil transport costs, even though it was still selling crude oil to India below the price cap of $60 per barrel.
Despite extensive sanctions, the Russian war economy is being boosted by defense and state spending, the New York Times reported in July. Higher oil prices are bad news for global central banks that have been trying to tame high inflation since last year. Energy is a key input for economic activities, so higher oil prices generally lead to inflation.
