The G7 group, in addition to Australia, agreed to establish a fixed price cap on Russian oil set to be finalized later this month, Reuters reported on Thursday.

The members previously discussed a floating rate. However, the decision was changed in favor of a fixed rate.

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Politico Europe reported in October that the EU reached an agreement to impose a price cap on Russian oil sales to third countries in an attempt to block Moscow's use of EU-registered vessels for its oil exports, while the G7 finance ministers and central banks explained that the decision to impose price caps on Russian oil was adopted unanimously at a virtual meeting of the group.

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"The Coalition has agreed the price cap will be a fixed price that will be reviewed regularly rather than a discount to an index," a source from within the coalition told Reuters on the condition of anonymity. "This will increase market stability and simplify compliance to minimize the burden on market participants.”

Multiple sources stated that no price was determined yet, though they should be ready in the upcoming weeks. They also said the price would be regularly reviewed and changed when necessary. 

The source explained that the decision to adopt a fixed rate was because pegging the Russian oil price to a discounted rate from the index would result in too much volatility.

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According to another source, the Coalition's members were concerned that pegging a floating rate below the Brent benchmark might allow Russian President Vladimir Putin to circumvent the measures by decreasing oil output. They also said that if Russia cuts the oil supply it would cause a Brent spike, which, in turn, would increase the prices of Russian oil and thus serve Putin.

On the other hand, a fixed price cap would mean that the coalition would have to convene on a more regular basis to review the price, which results in increased bureaucracy, the source added.

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The US Treasury Department announced in a guidance document released at the beginning of September that buying considerable amounts of Russian oil above the price cap agreed upon or providing fraudulent data or documentation of the transactions may bring about sanctions enforcement and that the price ceiling will go into force on December 5 for crude oil and February 5 for refined goods.

Following the announcement, Putin commented on the price cap attempts by stressing that his country would stop supplying oil and gas to countries that impose price ceilings. Capping prices, as some Western countries are considering, "would be an absolutely stupid decision."

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"We will not supply anything at all if it is contrary to our interests, in this case economic (interests)," the Russian President said. "No gas, no oil, no coal, no fuel oil, nothing."

Due to the decision's effect on the shipping industry, shipping services are waiting for further details on the coalition's plan.

A fixed price cap would protect insurance companies from sanctions and enable them to release new contracts without worrying about countries purchasing Russian oil later adjusting the price.

According to a Wall Street Journal report released last Friday, the US and its allies agreed upon more details as to which Russian oil sales will be subjected to the price cap, where the price cap would be enforced on Russian sea-supplied only on the first buyer on land.

Last April, French President Emmanuel Macron stated that if Europe decides to impose a gas embargo on Russia, the consequences would be seen next winter. "We will not see the consequences of this [sanctions against Russian energy resources] in the spring and summer of 2022 [as gas storages have been replenished], but next winter, we will feel them if there is no more Russian gas."

On October 6, the Russian Foreign Ministry called out the EU's decision to put a price cap on Russian oil exports to third countries, namely Cyprus, Malta, and Greece, and pledged to sell oil to countries that honor free market principles.

"The Group of 7’s plan to set a voluntary price ceiling on oil again proves that the principles of a market economy are alien to Brussels and Washington," Russian Foreign Ministry spokeswoman Maria Zakharova stated.

Last month, during a press conference following the EU summit in Brussels, Macron called out US "double standards" for selling gas to Europe at prices three to four times higher than it is sold in the US domestic markets.

"American gas is 3-4 times cheaper on the domestic market than the price at which they offer it to Europeans. These are double standards," Macron stated. "It concerns sincerity in transatlantic trade" and that this issue should be addressed.

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It's noteworthy that the disruptions in supply chains following Russia's operation in Ukraine and the subsequent comprehensive Western sanctions imposed on Russia caused a sharp increase in energy and food prices across the EU, and a price cap on Russian oil would worsen Europe's energy crisis even more.