The Price Cap on Russian Oil

Guest

Wally Adeyemo

US Deputy Secretary of the Treasury

Transcript

Jason Bordoff [00:00:05] In the month since Russia invaded Ukraine, world leaders have struggled to implement a global response that punishes Russia for its aggression, while at the same time minimizing the war’s impact on energy prices. Here in the United States, the Department of the Treasury has been at the center of this effort. Officials there have been negotiating with their international partners over a proposal to implement a price cap on Russian oil with the goal of reducing Russia’s energy revenue, while also keeping vitally needed oil barrels on the market. The background is that this summer the European Commission put an embargo into place on the import of most Russian oil to Europe starting December 5th. After that, Western services such as financing and insurance will not be available to those transporting Russian oil, raising concerns that Russian oil supply will be lost to the global market entirely. The price cap is intended to solve that problem, allowing the use of Western services if buyers pay below asset price. But not everyone is convinced the price cap will work, with experts citing the challenges of implementation and the risks of Russian retaliation, among other concerns. As debate over the policy rages on. So does the war in Ukraine, the global energy crisis and the fears of an impending recession. So what is the rationale for a global price cap? How would it work? How can the United States punish Russian aggression while protecting the economies of consumer countries? And what’s the outlook for American consumers for energy prices in the months ahead? This is Columbia Energy Exchange, a weekly podcast from the Center on Global Energy Policy at Columbia University. I’m Jason Bordoff. Today on the show, we have the deputy secretary of the U.S. Treasury Department, Wally Adeyemo, As deputy secretary, Wally Adeyemo has been at the center of the Biden administration’s COVID recovery effort, its response to Russian aggression and its stewardship of the American economy. Prior to taking over as deputy Secretary, while he served as deputy national security adviser for international economics and Deputy Director of the National Economic Council for the Obama Administration, he was also the first chief of staff of the Consumer Financial Protection Bureau. In the intervening years, he was the president of the Obama Foundation. We were lucky enough to host the deputy secretary at the Columbia annual Global Energy Summit, which took place in New York City on October 12th. He joined me on stage for a fireside chat about the price cap proposal, the outlook for energy markets, and how the Department of Treasury is using its economic policy levers to address the climate crisis. This episode of the Columbia Energy Exchange is a recording of that live in-person conversation. I hope you enjoy it. Okay, let’s bring everyone up to speed. Some people have been following this intensely. Some a little less so. What is a price cap? Why do we need that? And how would it work?

Wally Adeyemo [00:03:05] So let me start out by saying thanks to you, Jason, for having me here, but also for giving me my start in D.C. Jason was the first person to hire me when I came to D.C. and it’s great to see what he’s built here. I think the information that the Institute is providing has been helpful not only to the U.S. government but to governments around the world. And we have all benefited from your success. So to talk a little bit about what’s happening with regard to the G7 price cap, we have to start with the fact that this is all in response to Russia’s brutal invasion of Ukraine. And in response to that, the United States last year decided to ban the import of Russian oil. We’re well positioned to do that because we’re a net producer of energy in the United States. And by 2023, we will be producing oil at historic levels. But in May, Europe also decided to ban the import of Russian oil starting on December 5th. But in addition to doing that, they banned the use of European services for the shipping of Russian oil around the world. As we gathered with the G7 countries, we agreed that where we wanted to be with regard to Russian oil was we wanted to allow the supply to continue to move, but our goal was to reduce the revenues. So the idea here being that we want to make sure that we have a well-supplied global energy market because that’s important to our economy, but it’s also important to developing economies, which have been the biggest victims of Russia’s brutal invasion of Ukraine next to Ukraine. The Ukrainians have taken the brunt of this. But when you think about headline inflation and the pressures that rising food costs and rising energy costs have had in developing economies, that has meant a great deal to those economies. So what we designed in order to accomplish our two goals of allowing oil to flow but reducing revenues was a price cap. And what that meant was that G7 countries would allow Russia to continue to use the services that are provided by our service providers, be that financing, be that insurance, be that shipping as long as the oil is sold under a certain price. This does not mean that Russia has to exclusively use our services. We are completely fine with Russia using alternative services if they can find them. We think that fits with our two objectives because ultimately it will mean that Russia oil is still flowing, but the costs of those services will be higher because they’re doing less volume and it will be harder to find and that will reduce Russia’s revenues overall. So what we’re trying to do is not prevent Russia from being able to use alternative services. That is a that is a feature to us in terms of they can do that to move their oil. What we’re doing with the price cap is saying that an alternative for them, if they’re unable to pull together their own services infrastructure, is to continue using G7 services, but at a certain price that has been set by our coalition. We also think by making very clear to the world what that price is, it will mean that other countries that are negotiating with Russia for the import of their oil will be able to negotiate from the standpoint of knowing that Russia has an alternative price that they would sell out. So it would allow them to negotiate lower prices with Russia, even if they’re using alternative services, which again, reduces Russia’s revenues. So that is what we’re trying to accomplish with the price cap, allowing Russian oil to continue to flow to make sure the market remains well-supplied while at the same time reducing their revenues. And we’re already starting to see success from even talking about the idea, as we’ve heard from countries that they’re negotiating deals with Russia, with prices that are far below the current price of Brant and that Russia is trying to lock in those contracts ahead of December 5th when the Europeans sixth package of sanctions go into place.

Jason Bordoff [00:06:45] Can you talk about what you expect when that goes into effect December 5th? And then on product, gasoline, diesel in February of next year? One thing that’s been striking to me in this conversation is there was there was a sense that this would not be that disruptive to global markets. Oil is pretty fungible. It doesn’t go to Europe. It’ll go somewhere else instead. And it’s not easy. But mostly it figures out how to get there. And in order to persuade people that the price cap is necessary, people in Treasury and elsewhere first had to persuade the market. There’s a big problem coming. And this is going to be really, really difficult for oil markets to handle. But for this price cap. So talk a little bit about what you see and is that broad view you just described. We want to facilitate the continued flow of Russian oil. Is that sort of commonly shared across the EU in your view, or is actually the idea that we want to restrict Russian supply in part to put economic pressure on Putin? Is that how much do you see the Europeans moving in that direction as they think about the flexibility and discretion they have to implement what they’re doing December 5th? How much do you see it trending in that direction where it’s really becoming more restrictive?

Wally Adeyemo [00:07:51] So, Jason, as you saw the Europe put in place in eighth sense. And the package in which they took the first steps towards implementing the price cap. I think ultimately this comes down to economics. One of the things that we have done well with our European allies and partners is look at the basic economics. And the thing we know is that if Russia in some ways sold less oil but at a higher price, they could probably earn more revenues. So ultimately, we see the price cap as a way to make sure that Russia has options in order to make sure that their oil can reach markets, but that they’re doing it at lower revenue points going forward. December 5th, what we know to be true is that Europe is no longer going to purchase Russian oil. Europe purchases about 2 million barrels of Russian oil. That oil is going to have to find a new home. It’s going to have to be reordered in the global market. The goal market is usually fairly efficient. It would be made less efficient if, for example, there was a service ban put in place, which meant that Russia or the purchaser needed to find new routes and new services to put in place. That’s why while it’s called a price cap, it’s really a price exemption which says that if Russia or other countries are able to find alternative services, they should feel free to do that. We think that’s going to cost Russia more. Those countries are going to negotiate lower prices. It’s going to meet our two goals of making sure that oil continues to flow but brings down the revenues. But if Russia is unable to and they need to find other options where the country is purchasing needs to find other options. We want to make very clear that G7 services, including shipping and financing and insurance, are available to be used as long as the country is purchasing under a certain price point. And I think that we’re well aligned within not only the G7, but with the EU 27 on this being our ultimate goal. The EU has already taken actions to implement a policy that is consistent with the price cap. And now our question. Now we’re going to be working with our allies to set the actual price for oil. But as you mentioned, there’s also going to be a point in February when Europe is going to stop purchasing refined products from Russia. And at that point, again, we’re going to introduce price points there as well on refined products, both high value and low, low value refined products.

Jason Bordoff [00:09:56] And as you said, I think Treasury has said, you know, discussion about how to set the price cap is ongoing. Talk about where that stands, what the level of the price will be. And I think it’s any day now and check that, you know, contracts for December are being signed by Indian refiners and others. So it’s kind of. Is it getting too late to implement something for December 5th?

Wally Adeyemo [00:10:19] So we’re in regular conversations with compliance professionals across the service sector because what we want to do is build a compliance regime that’s going to work. So we’ve heard from them and what we’re doing is working to build out an attestation regime that will make it as easy as possible for service providers in the G7 to attest to the fact that they’re carrying Russian oil below the price cap in terms of setting the price cap. What we’ve said is that we’re going to set it above the price of production for Russia. We don’t want Russia to lose money shipping this oil because we know that if that happens, they’re less likely to produce. We’re going to look at historical data in terms of what Russia has earned in the past and also where the price is as we’re setting the price cap. But ultimately, I can’t tell you what the price is, because what we’re going to do is we’re going to work together amongst our allies and partners to set that price based on the historic data on what we’re seeing in the market today. And in order our goal ultimately is to make sure that Russia isn’t continuing to earn the high levels of revenue they’ve earned because of the price of the premium they put in the market due to the risk they’ve created by their invasion of Ukraine. But also to be in a place where we’re still encouraging them to produce because our goal is ultimately, if Russia can’t find alternative service providers to be in a position where Russia or the country that’s pressing for them could use G7 services, which will allow us to meet our two goals, which is ultimately to keep oil flowing and to bring down the revenues that Russia earns.

Jason Bordoff [00:11:46] So those are two goals. Keep the oil flowing, bring down revenue for Russia. There’s some uncertainty about how you implement a policy like this. We never really done anything like this before. And there’s the cost of production. And then there’s today’s price. So you don’t tell us what where you will land in that. But. But but I guess my question is, if you’re going to air in one direction or another, how do you think about which direction you want to air and letting oil flow or maybe tightening because is the primary priority to let the oil flow or is it is it to squeeze Russia from a revenue standpoint? Because you’re going to have to make a judgment call within that band to want to air on the side of the side.

Wally Adeyemo [00:12:21] And I think are we think that you can accomplish both things. And what you’ve seen in the market to date is that is true because Russia is currently supplying oil to the market, but they’re supplying it at a discount, as what we know from talking to a number of countries and our allies who are trying to do is drive that discount further down while Russia continues to do what they’ve been doing to date since the invasion, which is continuing to supply energy to the market. What we know is that oil is the biggest revenue source for Russia at this point and that they have done a great deal of work to find. New customers for the oil that they used to predominantly sell to Europe. And those customers are interested in receiving the lowest possible price. Part of what I’ve been doing is traveling the world explaining this policy, because we want people to be very clear about what we’re trying to accomplish here. And for the finance minister, the petroleum ministers that I meet with, all of them who won’t be surprised, are very interested in how they can pay less for energy. It is to a person I’ve never heard anyone say that I want to pay more for energy. And I think that the key for us is making sure that as we explain this to ministries and to our counterparts, the truth is that in most of these countries, the decision about purchasing oil. The negotiations have happened with private sector actors. That’s why a big part of what we’re doing is talking to groups like this to try and explain our policy. But honestly, spending a great deal of time with compliance professionals to explain the attestation system, to explain to them that ultimately, if you want to purchase Russian oil above the price cap, you can, but you’ll need to find alternative services which may be more expensive for you and less reliable. But you’re free to do that. And I think what we’re trying to do is make this something that makes economic sense for the purchaser, but also makes economic sense for Russia, because ultimately they need to sell more oil if their revenues are going down so that you’re encouraging them to keep the energy markets well-supplied.

Jason Bordoff [00:14:13] And why even kind of say allow that in the sense of if the goal is to let Russian also the market, but only if it’s below a certain price to squeeze revenue? One way to do that would be secondary sanctions unless you pay below a certain price. And I think some people have seen some as a ways and I asked a question about whether there’s consensus within the EU is some recent discussions in Brussels. I think something is right about possibly extending services ban on the rest to shipping, even if European ships are taking Russian oil to other places with Russian insurance or some other insurance, all the things you said would be allowed. Those are seen as efforts to make things tighter, not weaker. Why not just make them tighter unless there’s a price cap? And the most extreme version would be secondary sanctions with a price cap?

Wally Adeyemo [00:14:59] Yeah, we don’t we’re not planning to implement secondary sanctions because we don’t think that they’re needed. Ultimately, the thing that we are working towards is creating economic incentives for all parties to be in a position where you’re continuing to allow oil to flow and bringing down the cost of energy, the costs for buyers and bringing down revenues for Russia, which the economics which we think economically make sense for all players here. And what the Europeans are doing is exactly what I think is important for compliance professionals, but also for the market, which is giving certainty. Ultimately, that’s what I think market participants want. That’s what purchasers want, that’s what countries want. And certainty around what the Assad regime is going to look like is something that we have promised to compliance professionals but also to government, and saying that ultimately, if you want to use Western ships, if you want to use Western services at large, you’re going to have to pay below the price cap. But at the same time, if you’re able to build your own ecosystem of services and find alternative ships, that’s allowed. But you’re going to have to negotiate with countries and with companies that are well aware that the alternative will be a price that is set at a level that is below the current market price but above the price of production.

Jason Bordoff [00:16:15] So that that’ll make sense. And then some people say, okay, that makes sense. But as many Russian officials have already said, if their response is sorry, we’re not going to do that, and if you want to pay below the price cap, we’re just not selling. We’re happy to shoot ourselves in the foot. As you can argue, they’ve done with natural gas and just cut off energy exports and and helped plunge many of the other countries into recession. Why are you how worried are you about the risk of Russian retaliation?

Wally Adeyemo [00:16:40] So I think, as you know, Jason, natural gas is far different for Russia than oil. They earn far less revenue off of natural gas. Ultimately, Russia’s biggest customers now for oil are countries like China and India. Our view is that Russia has an interest in making sure that they’re not seen as raising costs for countries like that going forward. And they also want to be seen as a reliable supplier to the developing nations that they’re selling to. Ultimately, the truth is that countries like the United States and the EU are determining that as that over the course of this year, they’re no longer going to be purchasers of Russian oil. So Russia doesn’t have the ability to cut us off because we’ve already said that we’re cutting ourselves off. The question then becomes what can we do to make sure that we’re encouraging Russian oil to flow to countries that need it most countries in Africa and Latin America in Asia. And that’s exactly why we’ve come up with this price exception or price cap idea, because if Russia decides to find services that they can use to ship the oil to those countries, they should feel free to do that. We think that fits within our objectives of allowing Russian oil to flow by reducing their revenues. But if they’re unable to find those alternative services, we also want to make clear to not only Russia, but to those countries that we’re going to allow that oil to still be carried. Western service providers as long as it’s sold at a level that will allow those countries to be to get some relief from the high cost of energy today. And that’s something that we’re interested in and it’s something that countries like India and China and countries around the world are also interested in is bringing down the cost of energy.

Jason Bordoff [00:18:12] Do you think the risk of retaliation goes beyond Russia? Meaning there’s been lots of public reporting about how other producers in OPEC, including Saudi Arabia, are, don’t quite like the idea that buyers might get together and determine what the price of oil should be. Do you think that was part of what led to the decision last week in opaque? And is there a concern that could have other negative consequences for the oil market if generally producers try to push back and have a backlash against this idea?

Wally Adeyemo [00:18:40] I don’t think that’s what produced the result last week. I think that’s not what officials from OPIC have said publicly, and that’s not what they said to us privately. I think it’s important to remember that what we’re doing here is not setting the price of Russian oil. Ultimately, Russia can find alternative services to try and sell their oil at a different price. What we’re saying, though, is that service providers in the West who are potentially going to carry that oil if they decide to do so will only be able to do it at a certain price. Ultimately, Russia is free to go out and negotiate with countries to find alternative services to try and move their oil without Western services. What we’re creating here is an opportunity for developing economies that have been hit the hardest to be able to use Western services if they’re able to purchase under a certain price. But our goal is not in any way to try and set the price, but rather to make these services available with an exception.

Jason Bordoff [00:19:34] And so let me ask you about what happened last week in OPEC. The reaction in Washington has been pretty strong on both ends of Pennsylvania Avenue, on both sides of the aisle, and lots of ideas for what might be done in response. Some oil market related like an export release or a product export ban or and some in a sense retaliation, like, you know, cutting off arms sales. Talk to me about what’s what’s on the table and what we might expect in terms of a policy response.

Wally Adeyemo [00:19:59] So I think the reality is that we were disappointed by the decision that OPEC made because as you all know well, because you followed this closely, what OPEC has always said is that their goal is to keep energy markets well-supplied. And our view is that the where energy. Right now, energy is one of the primary drivers of inflation around the world. Energy prices are higher than they should be given where demand is. And we think that they should have maintained the levels of supply that were in the market. And I think that while we were disappointed, I know from my conversations with my counterparts around the world, consumers around the world were disappointed as well, because what they’ve seen is that because of the decision that was made by OPEC, you’re seeing prices instead of stabilizing and going down, going up at a moment where, as the IMF said this week, the global economy has weakened because of a number of headwinds, including COVID 19 and the COVID zero policies in China, but also because of the fact that the Kremlin has weaponized energy in Europe and the natural gas situation there has made the economic situation far less. At that moment, the idea that you would cut supply of the commodity that is driving headline inflation felt to be something that did not make sense. And we think that it’s not only bad for consuming countries, but ultimately it’s bad for OPEC if the global economy weakens because these are ultimately your customers.

Jason Bordoff [00:21:26] When you think about where sources of supply in a tight market might come from, some are constrained now for reasons that I think that within Treasury sanctions, there have been reports in the media about potential easing of the approach to Venezuela. Talk about Venezuela and talk about how the Iran negotiations are going.

Wally Adeyemo [00:21:44] Yeah, and I think that I’m not going to say anything people haven’t already heard. But ultimately, when we think about Venezuela, our decisions there are going to be driven by the choices that the Maduro regime makes. Our sanctions are put in place, have been put in place in order to encourage behavior change that is consistent with moving towards Democrat a democratic process in that country. And I think that we’re going to remain consistent in that. And with regard to Iran, ultimately our goal there is to make sure that Iran does not have a nuclear weapon because we think that Iran, a nuclear Iran, is destabilizing not only to the region but to the world. And we have the president’s made very clear that if Iran were willing to go back into the JCPOA, we would be willing to do the same. But again, we are in a place where they have not made that decision yet.

Jason Bordoff [00:22:34] At a higher level, talk about how you view the relationship between energy prices and the economic outlook. I mean, Europe is in an energy crisis. Some other parts of the world are US is feeling somewhat insulated from it. Gasoline prices are a little higher than normal, and it’s part of a broader inflation problem. But but how important are energy prices? How do you. You their connection to the outlook for the U.S. economy.

Wally Adeyemo [00:22:57] I think energy prices are quite important, and I think we’re encouraged by the fact that we’ve seen gasoline prices, prices at the pump come down further from their highest levels over the summer. But we want to see them come down more because ultimately the inflation inflationary pressures in our economy but globally are quite high. And I think the thing that we’re that people are focused on when they talk about energy is headline inflation. The headline inflation around the world, including here, is higher than it should be, and that’s being driven by food and energy. Ultimately, our goal here in the United States and around the world has got to be to increase supply of energy, which we’re focused on doing here. The president’s taking some steps in terms of using the SPR to try and create additional supply, but has also called on the private sector to increase production. And we’ve seen production start to increase in this country. We want to see more of that. And what he said is that if people have ideas for what we can do to increase production, please share them with us. We’re open to all ideas. That’s why we’ve been so focused on legislation like the legislation that the Senate has taken up on permitting reform to create opportunities for additional production here. But we also know that over the long term, one of the things that we have to focus on is ending our dependance on fossil fuels, both because of the climate impact but also because of energy security. And that’s why the investments made in the Inflation Reduction Act are so important long term for our economy.

Jason Bordoff [00:24:21] There are a few questions about that and we’re going to make sure to get you out on time because you’ve been very generous to join us during the IMF and World Bank meeting week in D.C. and we’re going to get you back there for that. But but there are a couple of questions that came in on beyond Oil Markets on the Inflation Reduction Act and what Treasury is doing on climate finance globally, coal plants. So on the Inflation Reduction Act, Treasury is sort of squarely in the middle now of implementing this historic piece of legislation and putting $400 billion out into the economy, roughly estimates. And it takes time to issue guidance for the 45 Q tax credit and nevertheless a whole host of new tax credits. Talk about how you’re going to be able to implement that and how that’s going to work.

Wally Adeyemo [00:25:01] And I think that one new thing, one of the things that we’re very focused on right now is implementation of the Inflation Reduction Act, because it helps us meet our climate goals, but also because of the fact that it puts us in a better place in terms of energy security. And finally, because it creates real economic opportunity within the United States, part of what where the president is focused on is how do we expand the productive capacity of the United States and make us more competitive going forward? One of things I do when I’m in New York is sit down and talk to investors. And one of the most encouraging things that I heard was when I sat down with a number of investors who have climate oriented funds. Is that because of the inflation reduction that they’re now thinking about spending more time in places like Ohio rather than flying abroad? Because they see a real, real opportunity here in the United States to deploy capital as they’re seeing the investments made by Treasury through the tax credits that we have. So the way we’re thinking about implementation is we’re taking a three pronged approach. One is that we’re asking stakeholders for advice. Last week, we put out a solicitation for in four people’s opinions and advice with regard to how we implement the various provisions, partially in order to make sure that we understand the perspective of stakeholders on how we encourage the energy transitions needed to is we want to provide certainty to the marketplace as soon as possible. We started by doing this when it came to electric vehicles. On the day the president signed it, we put out some information about which electric vehicles would be eligible. And over the course of the next several months, we’ll provide some of regulatory guidance and at some point regulatory guidance to start directing investors in terms of how they can make these investments. And finally, we want to do it in a prudent way that’s mindful of the fact that this ultimately the American people’s money and we want to make sure that we’re good stewards of that. But ultimately, if we do this. All right, some estimates have said that this could create $3 trillion of investment in the United States, and it could really it could help transform the US economy in a way that makes us a clean energy economy going forward, while also getting us very close to the goals that we’ve set out in terms of climate over the next decade.

Jason Bordoff [00:27:03] Let me ask you about what qualifies, because this is a major investment in clean energy. It’s also industrial policy. And to get those tax credits, a lot of stuff has to be done in the US or neighboring countries or free trade agreement countries. I interviewed Frans Timmermans, the European Union official in charge of the European Green Deal here a few weeks ago. And he was like, I kind of don’t like some of the protectionist stuff in this bill. Are you worried about tit for tat retaliation or a trade trade conflict as a result of the IRA?

Wally Adeyemo [00:27:28] So I think the key thing for us to do is to step back for a moment. And I think one of the things that Congress did in the IRA was to try and encourage the creation of supply chains, both here in the United States, but among our allies and friends. Because of the lessons we learned from COVID 19, we saw how fragile supply chains are around the world. And we want to make sure that going forward we’re more reliant on supply chains, as Secretary Yellen put it, Friend showing make. Ensure that supply chains are stronger here in the United States, but also amongst our friends and allies. Ultimately, what the Inflation Reduction Act will do is to do that by encouraging more domestic production of critical minerals, but also by creating more opportunities for allies and partners to both sell goods and services here, but to also increase their supply chains as well. One of the reasons we solicited advice from stakeholders is so we can hear from our allies and partners in terms of both their concerns, but their advice with regard to implementation. And our hope is that a decade from now, when the Inflation Reduction Act provisions around climate are fully implemented, we’ll end up in a place where not only we’ve seen an expansion of the U.S. economy and the green economy here in the United States, but because of the investments we’ve made here, you are seeing greater investments around the world that will produce that will help us meet our overarching climate goals globally as well.

Jason Bordoff [00:28:48] Last question. Many people, some people in this room, many other people will be in Sharm el-Sheikh in about a month. And the big issue there is going to be how the developing world feels about their lack of responsibility for the problem of climate change and the impacts that they are feeling and and the energy crisis they’re dealing with now and feeling like wealthier countries haven’t made good on the promises that were made in terms of financial support. So Treasury plays a key role in international climate finance. Talk about what more is going to be done, needs to be done. What Treasury’s doing to think about parts of the world that that are looking for help, to both deal with climate impacts and make a transition.

Wally Adeyemo [00:29:31] So yesterday I had a chance to meet with the Egyptian finance minister in Washington to talk about 27, but I also had dinner with Secretary Yellen and ten African finance ministers where some of these topics came up. And I think the key thing to remember is that President Biden has made a commitment of $11 billion of financing to help meet our commitments, to try and help with the with the clean energy transition, especially in the developing world. The thing that those finance ministers pointed out is that while we can do whatever we can, we must do more in terms of public financing. Ultimately, the thing that we have to do is to crowd in private sector financing. Secretary Yellen a week ago gave a speech about how we can form the multilateral development banks to make their mission while they stay focused on ensuring that they deal with poverty, that they also think about some of the global challenges that we face, including climate change. You mentioned food security, and I think food security is a major issue and that the Russian invasion of Ukraine has clearly exacerbated that challenge. But food security existed before Russia’s invasion of Ukraine, and one of the biggest drivers of that food insecurity was climate change that was happening in these countries. So we think that addressing the issue of climate change fits well within the scope of what the multilateral development banks are doing. But our goal has got to be to use public resources to try and attract the trillion dollars of private capital to be able to help go after this problem. And I know this is a place where the Egyptian finance minister is going to be focused on as we go into COP 27. We’re looking forward to that conversation.

Jason Bordoff [00:31:04] This is a really busy week in D.C. We’re going to get you back there, as very generous of you to make time to be with us and explain what Treasury is doing and how you’re thinking about complex dynamics with climate and the energy market today. Please join me in thinking Deputy Secretary Ed. Thank you again, Deputy Secretary. And thank you to you, our listeners, for joining us on this episode of Columbia Energy Exchange. The show is brought to you by the Center on Global Energy Policy at Columbia University’s School of International and Public Affairs. The show is hosted by me, Jason Bordoff, and by Bill Loveless. The show is produced by Stephen Lacey, Cecily Mazer Martinez, and Aaron Hardwick from Postscript Media. Additional support from Daniel Prop, Noah Kaufman, Sara Time, Sara, Natalie Volk and Kyu Lee Greg Vill Franke engineered the show. For more information about the podcast or the Center on Global Energy Policy, visit us online at Energy Policy dot Columbia dot edu or follow us on social media at Columbia U Energy. And please, if you feel inclined, give us a rating on Apple Podcasts. It really helps us out. Thanks again for listening. We’ll see you next week.

In the months since Russia invaded Ukraine, world leaders have struggled to implement a global response that punishes Russia for its aggression, while simultaneously minimizing the war’s impact on energy prices. In the United States, the Department of the Treasury has been at the center of this effort. Officials there have been negotiating with international partners over a proposal to implement a price cap on Russian oil. Their goal? To reduce Russia’s energy revenue while keeping vitally needed oil on the market.

A price cap would allow those transporting Russian oil to use western services if buyers pay below a set price. But some experts are skeptical. Can the United States really punish Russian aggression while protecting the economies of consumer countries? What are the chances of Russian retaliation? And how would a global price cap affect energy prices for American consumers in the months ahead?

This week, we’re airing a conversation between host Jason Bordoff and Wally Adeyemo at the recent Columbia Global Energy Summit.

As deputy secretary of the Treasury, Wally has been at the center of the Biden Administration’s Covid recovery effort, its response to Russian aggression, and its stewardship of the American economy.

Prior to taking over as deputy secretary, Wally served as deputy national security adviser for International Economics and deputy director of the National Economic Council for the Obama Administration. He was also the first chief of staff of the Consumer Financial Protection Bureau.

Jason and Wally discuss the price cap proposal, the outlook for energy markets, and how the Department of the Treasury is using its economic policy levers to address the climate crisis.

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Wally Adeyemo

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