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There seems to be a lot of confusion about what's going on with price caps and what "independence" means, so here's an explanation: The price cap on Russian ga

There seems to be a lot of confusion about what's going on with price caps and what "independence" means, so here's an explanation: The price cap on Russian gas effectively sets a maximum price that those enforcing the cap will pay. This means that Russia can't sell at full price because even those not enforcing the cap aren't willing to pay full price for it (why should they, when Russia's choices of customers are severely limited?). It's an artificially induced market pressure to keep prices down. Does it stop Russian gas from flowing? No, but that's not the point; the point is to reduce Russia's profits from the gas. The world still gets all their gas, but Russia gets far less money for it. Does it mean that Russian gas doesn't make it to Europe anymore? Nope. In fact, "Russian" gas probably makes up a big chunk of imports to price cap countries. But since Russia can't charge full price for its gas, the profits go to the middlemen, who raise prices to the actual market rate and pocket the difference while shipping to whoever (including price cap countries, because once it's owned by the middleman it's no longer "Russian" gas, but regular market rate gas). So what is this "independence from Russian gas" all about then? It's about not being directly dependent upon Russia for providing the gas (i.e. Russia can't threaten to turn off the taps if Europe doesn't toe the line). The only thing Russia could do now is stop supplying gas to everyone, which would be even worse than the reduced profits they're suffering already.

yunohn 3y ago
Your explanation of the situation sounds like the Byzantine corporate structures that multinationals use to evade taxes. I assume the goal is the same - to hoodwink and exploit the populace. Morally speaking, I’d expect to have zero imports of Russian fuel to declare “independence”.
- kstenerud 3y ago
  The goal is to keep the gas supply relatively stable, while reducing Russia's share of the profits. It's a kind of price-fixing-in-reverse. And you don't need zero imports to declare independence. You just need them low enough that Russia will gain no political leverage over you by threatening to shut down the supply to your region.
  - yunohn 3y ago
    We have different definitions of "independence".
radiator 3y ago
In your rather long post, you did not mention the fact that Russia refuses to sell oil to any country which applies the price cap. I wonder, is this really not relevant for your analysis?
- kstenerud 3y ago
  It doesn't help Russia. The end result is the same: A smaller pool of customers and an anchored price for the remaining customers. In fact, Russia had to reduce their output because they refuse to sell it to countries that participate in the price cap and there isn't enough demand otherwise (also most of their flow goes west through the now mostly idle pipelines to Europe - It's MUCH harder to move oil east or south because the infrastructure in that direction isn't big enough to handle such a surge). So Russia's losing even MORE profits by refusing to sell to them. AND they still have to maintain the now idle pipelines to the West or else they'll break down over time and become useless.
  - yogthos 3y ago
    That's just factually wrong I'm afraid https://www.cnn.com/2023/04/14/energy/russia-oil-exports-iea-report/index.html https://www.cnn.com/2023/04/14/energy/russia-oil-exports-iea...
    - kstenerud 3y ago
      "That's just factually wrong I'm afraid" This kind of response is incredibly rude. So it looks like their production has since gone up, a lot (after dropping mid last year). Profits are still down because nobody's paying full price. https://www.euronews.com/2023/05/31/russian-oil-exports-are-at-a-post-invasion-high-but-which-countries-are-buying-it https://www.euronews.com/2023/05/31/russian-oil-exports-are-...
      - yogthos 3y ago
        I'm not sure what's rude about stating that the statement you made is factually wrong. Furthermore, the west doesn't really have good data on the volume of sales Russia is doing because these transactions are happening outside of SWIFT.
unmole 3y ago
> This means that Russia can't sell at full price because even those not enforcing the cap aren't willing to pay full price for it India and China have been paying well above the price cap: https://www.reuters.com/business/energy/india-china-snap-up-russian-oil-april-above-price-cap-2023-04-18/ https://www.reuters.com/business/energy/india-china-snap-up-...
- kstenerud 3y ago
  They pay more than the price cap, but less than the market rate (because they don't have to pay market rate now that Russia doesn't have much choice of customers - supply and demand). And that's really the whole point. We'd prefer for China and India to support the price cap because that would even further reduce Russia's customer base (and by extension the price that they can actually sell at). But even as things stand, Russia is losing profits hand over fist.
ghostwriter 3y ago
> This means that Russia can't sell at full price because even those not enforcing the cap aren't willing to pay full price for it (why should they, when Russia's choices of customers are severely limited?) Yeah, as if energy sources are fashion material and are being bought out of pure fun and leisure. Because countries can just allow themselves not to rely on energy.

yunohn 3y ago

Your explanation of the situation sounds like the Byzantine corporate structures that multinationals use to evade taxes. I assume the goal is the same - to hoodwink and exploit the populace. Morally speaking, I’d expect to have zero imports of Russian fuel to declare “independence”.

kstenerud 3y ago
The goal is to keep the gas supply relatively stable, while reducing Russia's share of the profits. It's a kind of price-fixing-in-reverse. And you don't need zero imports to declare independence. You just need them low enough that Russia will gain no political leverage over you by threatening to shut down the supply to your region.
- yunohn 3y ago
  We have different definitions of "independence".

radiator 3y ago

In your rather long post, you did not mention the fact that Russia refuses to sell oil to any country which applies the price cap. I wonder, is this really not relevant for your analysis?

kstenerud 3y ago
It doesn't help Russia. The end result is the same: A smaller pool of customers and an anchored price for the remaining customers. In fact, Russia had to reduce their output because they refuse to sell it to countries that participate in the price cap and there isn't enough demand otherwise (also most of their flow goes west through the now mostly idle pipelines to Europe - It's MUCH harder to move oil east or south because the infrastructure in that direction isn't big enough to handle such a surge). So Russia's losing even MORE profits by refusing to sell to them. AND they still have to maintain the now idle pipelines to the West or else they'll break down over time and become useless.
- yogthos 3y ago
  That's just factually wrong I'm afraid https://www.cnn.com/2023/04/14/energy/russia-oil-exports-iea-report/index.html https://www.cnn.com/2023/04/14/energy/russia-oil-exports-iea...
  - kstenerud 3y ago
    "That's just factually wrong I'm afraid" This kind of response is incredibly rude. So it looks like their production has since gone up, a lot (after dropping mid last year). Profits are still down because nobody's paying full price. https://www.euronews.com/2023/05/31/russian-oil-exports-are-at-a-post-invasion-high-but-which-countries-are-buying-it https://www.euronews.com/2023/05/31/russian-oil-exports-are-...
    - yogthos 3y ago
      I'm not sure what's rude about stating that the statement you made is factually wrong. Furthermore, the west doesn't really have good data on the volume of sales Russia is doing because these transactions are happening outside of SWIFT.

unmole 3y ago

> This means that Russia can't sell at full price because even those not enforcing the cap aren't willing to pay full price for it India and China have been paying well above the price cap: https://www.reuters.com/business/energy/india-china-snap-up-russian-oil-april-above-price-cap-2023-04-18/ https://www.reuters.com/business/energy/india-china-snap-up-...

kstenerud 3y ago
They pay more than the price cap, but less than the market rate (because they don't have to pay market rate now that Russia doesn't have much choice of customers - supply and demand). And that's really the whole point. We'd prefer for China and India to support the price cap because that would even further reduce Russia's customer base (and by extension the price that they can actually sell at). But even as things stand, Russia is losing profits hand over fist.

ghostwriter 3y ago

> This means that Russia can't sell at full price because even those not enforcing the cap aren't willing to pay full price for it (why should they, when Russia's choices of customers are severely limited?) Yeah, as if energy sources are fashion material and are being bought out of pure fun and leisure. Because countries can just allow themselves not to rely on energy.