Yellen defends Russian oil price cap in wake of OPEC+ retaliation
Yellen says Russian oil cap will benefit low- and middle-income countries
President Biden said Thursday he had a reaction of "disappointment" after OPEC+ decided to cut oil production. Biden said the U.S. is looking at "alternatives" and that "we haven't made up our mind yet."
Treasury Secretary Janet Yellen touted efforts by the U.S. and Europe to implement a price cap on Russian oil and choke off a massive amount of revenue for Moscow, despite retaliatory production cuts from OPEC+ this week.
Speaking at the Center for Global Development think tank on Thursday, Yellen said the price ceiling on Russian oil – which will impose a ban on transporting it by sea to other countries above the limit – is designed to keep the oil flowing into global markets at lower prices, "particularly benefiting low- and middle-income countries."
European Union countries on Wednesday agreed to impose the price cap, which the Group of Seven wealthy nations want in place by December 5, in order to penalize Russia for the war in Ukraine. Yellen has been a major advocate for the price cap, with the Treasury trying to onboard as many nations as possible to join the buyers' cartel.
Treasury officials previously argued the price limit will reduce the revenue the Kremlin generates from oil by tens of billions of dollars annually and will also discourage production.
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Janet Yellen, pictured here holding a news conference in the Cash Room at the U.S. Treasury Department in Washington, D.C. July 28, 2022. (REUTERS/Jonathan Ernst / Reuters Photos)
Yellen said on Thursday she anticipates the cap will "cut into the revenue that [Russian President Vladimir Putin] is using to fund his illegal war. These efforts must continue."
Her comments come just one day after a coalition of oil-producing countries led by Russia and Saudi Arabia – known as OPEC+ – announced it will slash oil production by 2 million barrels, the first major cut in two years. The move threatens to raise oil prices at a time when the world is already combating record-high inflation.
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The White House condemned the production cuts, which threaten to push gas prices higher with midterm elections just one month away.
President Biden boards Air Force One at Andrews Air Force Base, Maryland, Thursday, Oct. 6, 2022, to travel to Poughkeepsie, New York. (AP Photo/Andrew Harnik / AP Newsroom)
"The president is disappointed by the shortsighted decision by OPEC Plus to cut production quotas while the global economy is dealing with the continued negative impact of Putin’s invasion of Ukraine," Brian Deese, the director of the National Economic Council, and Jake Sullivan, the national security adviser, said in a statement.
Yellen did not comment on the move on Thursday, but she has previously warned that Americans could once again see a spike in prices at the pump as the EU tries to scale back its reliance on Russian oil.
Oil pumpjacks stand in the Inglewood Oil Field on Nov. 23, 2021 in Los Angeles. President Biden announced a plan to release oil from the Strategic Petroleum Reserve in an effort to curb high gas prices. ((Photo by Mario Tama/Getty Images) / Getty Images)
"It is possible that that could cause a spike in oil prices," she said in September during an interview on CNN.
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After hitting a record high of $5.01 per gallon in mid-June, a gallon of gas now costs about $3.86 on average, according to AAA. While that marks a 23% decline from the summer peak, it is still up 29% from just one year ago.