The measure could increase the gap between supply and demand
The US-proposed limits on the price of Russian oil could further exacerbate the global energy crisis, as it would not help solve the supply issues the world is facing, Indonesian Finance Minister Sri Mulyani Indrawati told CNBC on Friday.
According to the official, energy prices are high because demand is outstripping supply, which has already been disrupted due to Russia’s military operation in Ukraine and subsequent Western sanctions which target the country’s energy sector.
“Putting a cap is definitely not going to solve the problem, because it is about the quantity which is not adequate, comparing to the demand which is in place,” Indrawati said, speaking to the press on the sidelines of the G20 meeting of finance ministers and central bank governors in Bali, Indonesia.
The official added that the supply-demand gap is only going to widen in the coming months as the heating season approaches.
Indrawati’s statements come amid US Treasury Secretary Janet Yellen’s trip to Asia, during which she aims to garner support for the price-cap mechanism. Yellen on Wednesday called the price cap “one of our most powerful tools” to fight inflation.
Also on Wednesday, Assistant Secretary of State for the US Bureau of European and Eurasian Affairs Molly Montgomery said Washington views the proposed mechanism as an opportunity to pay less for Russian energy imports and stabilize the global oil market.
Analysts, however, doubt whether the measure would work, as Russia could choose not to sell its oil at the price set by Washington. US National Security Advisor Jake Sullivan recently said the introduction of a price cap mechanism will take time, as many details have to be sorted out before it can be finalized.
The US has been trying to persuade India and China to support the price cap, but experts doubt they will agree, as both countries are currently stocking up on Russian crude at large discounts.
Indrawati said the source of the current crisis is the conflict in Ukraine.
“It is because of that war, that the whole disruption of all this supply, as well as then the implication of war in terms of sanctions – it’s even creating a more complex situation,” she stated, referring to the US ban on Russian oil imports and the EU’s partial oil embargo.
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