- One of the best hopes against sky-high inflation is a price cap on Russian oil, Janet Yellen said.
- CPI data released on Wednesday showed prices jumped 9.1% year-over-year in June.
- Some experts think Russia will retaliate against a price cap, and could send prices spiking to $150 per barrel.
Inflation in June surged to 9.1%, marking the fastest rise in 41 years, but a cap on Russian oil prices may be one of the most potent tools to bring it under control, US Treasury Secretary Janet Yellen said.
Wednesday' Consumer Price Index data showed inflation is "unacceptably high," Yellen said at a press conference on Thursday.
In addition to aggressive rate hikes be the Federal Reserve at its next meeting at the end of this month, Yellen stated that policymakers in Washington would continue efforts to control Russian energy costs, which she said was largely responsible for driving inflation to unexpected levels.
"A price cap on Russian oil is one of our most powerful tools to address the pain that Americans and families across the world are feeling at the gas pump and the grocery store right now," Yellen said, adding that the effects of Russia's war on Ukraine has spilled into the global economy, causing energy and food prices to surge. "A limit on the price of Russian oil will deny Putin revenue his war machine needs," she added.
The plan to cap Russian oil prices was floated between the US and allies last month, with a proposal of limiting prices paid to $40-$60 a barrel. Industry experts have been skeptical such a deal could come to fruition, as it would require cooperation from Russia and Russia's allies, who have been getting significant discounts on crude as western nations shun Russian supplies.
Analysts have said that imposing a price cap could cause Russia to retaliate by further restricting energy flows, spiking the price of oil to as high as $150 a barrel by the end of the year, by the time the EU ban on Russian oil products comes into effect.
Sergei Ryabov, Russia's deputy foreign minister, said that a price cap proposal would "collapse," and the Chinese Ministry of Commerce encouraged western nations to find other means of cooperation. The US has sought the support of India and Japan to back the price cap, and Yellen is currently traveling in Asia to rally other countries in support of the plan.
Russian oil revenue has soared since Vladimir Putin ordered the invasion of Ukraine, pulling in nearly $100 billion in energy exports in the first 100 days of war according to the New York Times, and around $24 billion from Chinese and Indian buyers alone in the first three months.