Discussion paper

DP18934 The Impact of the 2022 Oil Embargo and Price Cap on Russian Oil Prices

This paper documents the effect of the oil embargo and price cap on Russian oil exports in the wake of the Russian invasion of Ukraine in February 2022. We show that the embargo forced Russia to accept a $32/bbl discount on its Urals crude in March 2023 relative to January 2022, nearly half of which is directly attributable to the higher cost of shipping crude oil over longer distances, as Russia diverted much of its crude oil exports to India. Based on a calibrated model of global oil supply and demand, the remainder ($17/bbl) can be explained by increased Indian bargaining power. We also provide a similar analysis for the ESPO price discount on exports to China. In contrast, the price cap deprived Russia of the financial resources it spent on assembling a “shadow” fleet of tankers, but its effect on the Russian oil export price was negligible once the adoption of the price cap had facilitated the use of Western services to transport Russian oil to Asia.


Kilian, L, D Rapson and B Schipper (2024), ‘DP18934 The Impact of the 2022 Oil Embargo and Price Cap on Russian Oil Prices‘, CEPR Discussion Paper No. 18934. CEPR Press, Paris & London. https://cepr.org/publications/dp18934