The Oil Price Cap Continues To Baffle Traders

Last week saw the start of a price cap mechanism conceived of by the U.S. and embraced by the G7 and the European Union, aimed at keeping Russian oil flowing into international markets but reducing Russia’s revenue from that oil. The price cap came into effect in the company of an almost complete embargo on Russian oil imports into the European Union, giving traders in Europe at least a theoretical opportunity to buy and sell Russian crude.

But the authors of the cap did not think about oil traders. To begin with, about half of the G7, including…