I will be honest: a few months ago, when the West (European Union, United States, Canada, Australia, & Japan) announced a price cap on Russian oil… I didn’t think it would work. I didn’t have any good rationale for this skepticism, other than the fact that it was a gut feeling. Intuition. As an economics student, it’s drilled into you that price ceilings are BAD and INEFFICIENT.
More importantly, such a price ceiling had never been attempted before, and I thought it would fail if for no other reason than I didn’t think the hubristic West had the competence to pull it off. Surely such an audacious plan would backfire, much like most of the other economic sanctions against Russia have backfired or utterly failed.
It still might backfire — we are early days yet, the cap on crude oil was first implemented on December 5th, 2022, and it won’t be fully implemented until February 5th, 2023 when further caps will be imposed on diesel, kerosene and fuel oil — but so far, it seems to be working as intended.
At least, it’s kind of working. It seems like it is going to work. Probably. Maybe.