So, can anyone with knowledge share how the price cap has affected russian exports? Is it effective? If so that's a dangerous new weapon in the west's control.
Look, price controls don't work. They always lead to shortages. When Maduro fixed the price of paper in Venezuela, paper vanished from supermarket shelves. The West put sanctions on shipping of Russian oil above the price cap, so the amount of oil shipped with those ships will decrease or vanish completely. It is as simple as that. Same deal happened with Nixon fixing prices. Producers do not like working below market price. And producers do not work for free or at a loss with no good reason. Less of it all in a conflict like this.
So a certain amount of oil will vanish off the global market. The average price of oil will increase as a result because the other oil producing countries have minimal leeway to increase supply, and might not even want to, OPEC has already manifested itself to be against price caps on oil, and they might try to counter the practice as a matter of principle.
Because the market is now asymmetric and Western countries no longer want to import Russian oil, Russian oil price will go down, and other nations oil price will go up. This basically taxes Western countries energy imports, while countries who balk at the sanctions will pay a lower price. The current sanctions are already pretty close to an embargo. The West will likely try to apply secondary sanctions or do an actual embargo next. But the thing is you cannot replace an oil exporter the size of Saudi Arabia just like that. The non-Western countries will not want their economies to implode without oil to the benefit of wealthy countries. There will be friction that is for sure.
Oil - yes, gas - no, because Russia's largest fields are in Western Siberia and most of the gas is delivered through pipes that go to Europe. Until "Power of Siberia 2" is finished, that gas either has to go to Europe or get wasted.
Russia can export some of the gas via LNG. And the gas is still flowing West via Ukraine, Blue Stream, and Turk Stream.
There might be like 80 bcm on balance they aren't exporting that would have otherwise. I have not looked at the numbers lately.
Power of Siberia 2 is supposed to take care of 50 bcm and the rest will be able to be exported as LNG once more capacity goes up.
Arctic LNG 2 first string will come online in 2023. You will likely see more come online two years after that. And in 2028 we might see Power of Siberia 2. Who knows.
With regards to capital flows from export in 2 years Russia might be exporting 38 bcm or more to China via Power of Siberia. And then there are the possible expansions.
I am not a subject matter expert in upstream petroleum. Is there the possibility of sealing the gas inside the reservoir and not producing it? Just turn the valves off?
It depends a lot on the equipment. Usually, it is economically infeasible to stop production and then restart it. Most of the time excess output is either stored or just simply burned out.
Russia has a huge amount of LNG storage. Several months worth of it. They can fill the storage. And from what I heard they can throttle the output of the gas wells to a degree. They lack a strategic oil reserve thus far, so oil storage is way more limited.
Issue with oil production cuts is that Russia still loses money in that case. Plus Urals is already traded with a significant discount compared to Brent, currently its market price is lower than the $60 "ceiling". The situation was worse at the beginning (when Russian export fell 1.5 mln barrels/day) due to lack of insurers, now the exports are slowly going up but are still lower than before the embargo. However, with China opening up, we can expect an upward trend for the global oil prices which will ultimately test the effectiveness of that "ceiling".
Right. China will start using more oil. While there will be issues shipping Urals because of lack of ships I expect Russia to simply cut production of oil. They will not be selling oil below cost on a situation like this it is as simple as that. In the long run Russia might make pipelines to export more Urals oil into China. As is they already export from Vankor into China to some degree but ESPO is already operating at top capacity.