Capping Russian oil prices won’t solve the world’s energy problems, said Indonesian Finance Minister Sri Mulyani Indrawati on Friday.
Prices are high because demand outstrips supply, which has been disrupted, and a price ceiling will not resolve that, she said.
“Putting a cap definitely is not going to solve the problem, because it is about the quantity which is not adequate, comparing to the demand which is in place,” she told CNBC’s Martin Soong at the Group of 20 meeting of finance ministers and central bank governors in Bali, Indonesia.
As the U.S. and European nations move toward winter, demand for energy will increase further, she added.
Her comments came a day after U.S. Treasury Secretary Janet Yellen said a price cap is “one of our most powerful tools” to fight inflation.
The U.S. and other G-7 countries are considering a cap on Russia’s oil prices in a bid to limit funds flowing into the Kremlin’s war chest while lowering the cost of energy for consumers.
But analysts have questioned whether such a plan would work, since Russia could choose not to sell at the price set by the U.S. and its allies. In addition, countries such as India and China, which have been snapping up oil from Russia, may not agree to the price cap.
The war in Ukraine has increased uncertainty in the oil market and pushed prices higher.
“That’s why I think [Indonesian] President Jokowi in his visit to the place of the conflict [said] we want the war to be ended, because this is the source of the problem,” Sri Mulyani said.
“It is because of that war, that the whole disruption of all this supply, as well as then the implication of war in terms of the sanction — it’s even creating more complex situation,” she said. The U.S. has banned Russian oil imports, and the European Union wants to impose a gradual embargo.
A range of supply and demand factors have also contributed to the rise in energy prices.
There has been an underinvestment in energy supply, while some oil-producing countries have struggled to boost output. On the other hand, demand soared as economies reopened and travel picked up.
— CNBC’s Su-Lin Tan, Silvia Amaro and Sam Meredith contributed to this report.