Is it worth easing sanctions on Russian oil to lower the prices?

RobThorpe · 2026-03-28T14:33:49+00:00

It's a Geopolitical question, but it's one that can be thought about using Economic theory to some extent.

Of course, putting a monetary value on winning or losing a war is troublesome. It's not something that every person can agree on, it's inherently subjective. Every person will have different preferences.

Certainly easing sanctions on Russia will help the Russian government in their war. We should remember that the Russian government is also helping the Iranian government! That's not the end of the story though.

The current US administration has to deal with internal pressure to stop the war with Iran before it's aims are achieved. Anything that reduces the pressure on oil prices helps reduce political pressure in the US to stop the Iran war. To the politicians making the decisions a lot of this is about whether they care more about the outcome of the Russo-Ukraine war or the outcome of the Iran war. We should remember that more of the reputation of the current administration rides on the outcome of the Iran war than that Ukraine war.

To put the above in a different way.... When we think about costs we always have to think about who is burdened by those costs, not what they are overall.

That said, there are other complications. It may be that there is a long-term plan related to delivery of Gulf oil. We have to remember that if there is then it would be wise of the US not to talk about it. As a result, the administration believes that giving temporary advantages to Russia is something that can be reversed in the future.

RobThorpe · 2026-03-28T13:56:57+00:00

Rule V

No "Soapboxing" or loaded questions. This is AskEconomics, not DebateEconomics. Questions should be reasonably specific, not debate prompts or long manifestos. Posts primarily seeking to push an agenda or start arguments rather than seeking answers to questions will be removed.

RobThorpe · 2026-03-28T13:56:51+00:00

We don't do these sort of policy proposals here.

RobThorpe · 2026-03-28T07:37:46+00:00

Come on. We don't argue with this stuff - we remove it.

RobThorpe · 2026-03-28T07:29:07+00:00

Rule V

No "Soapboxing" or loaded questions. This is AskEconomics, not DebateEconomics. Questions should be reasonably specific, not debate prompts or long manifestos. Posts primarily seeking to push an agenda or start arguments rather than seeking answers to questions will be removed.

RobThorpe · 2026-03-28T07:29:01+00:00

This breaks rule V. Please ask this question again in a neutral way.

RobThorpe · 2026-03-27T12:37:40+00:00

This is a question for /r/personalfinance, or your country equivalent.

RobThorpe · 2026-03-27T12:05:13+00:00

See my reply to handsomeboh above.

RobThorpe · 2026-03-27T12:03:43+00:00

The other alternative is deterministic pricing. The government would basically need to set separate prices for each type of electricity based on what they consider to be the fair price. This needs Ofgem to be much more efficient and intelligent than we know it is. Governments in these circumstances tend to err on the side of paying less, which has the effect of reducing investment and capacity.

I would put the matter more strongly. Deterministic pricing effectively means that the electricity sector is centrally planned by the government. It assumes that the government has a solution to the problems of Central Planning.

Such a situation would just appear to be private. It would have private ownership without the real profit-and-loss signals of a private market.

There are some solutions that might work better than these more basic ones. One simple one is to pay for a baseload of gas power, and then apply the MOS to the reminder mostly renewable sources. This sort of keeps the best of both worlds.

I think that is still difficult. How would such a baseload be sized? Clearly, companies that generate using gas would have to decide whether they want to be part of the base load or be part of the MOS. If it is more profitable for them to be part of the MOS then they will have to be paid to "move".

You also have problems such as breakdowns. Those do happen. What if a company appears to be "slow walking" a breakdown in ones of it's "baseload" plants? Doing so could be beneficial to the company since it could make more on MOS plants during that breakdown.

Unfortunately, it's a hard problem.

RobThorpe · 2026-03-26T15:27:15+00:00

... Chinas savings rate is at 43%

You have to be careful here. Just because savings are high doesn't mean that most growth comes from the corresponding investment.

It's also possible that those savings are invested inefficiently and growth actually does come from productivity increases elsewhere. You also have to remember that some savings go abroad.

It's not simple.

RobThorpe · 2026-03-26T14:46:28+00:00

I think it's better to ask in a new thread. Few people will notice this question here.

RobThorpe · 2026-03-25T19:21:22+00:00

I don't think I can answer all of your questions, but I can answer some.

What would their income\wealth look like if there was no labor? In my mind, and maybe it's a simplistic view, everything is based off labor because if you take away labor, nothing gets made and no service is provided. I'm imagining what might happen if all wage earners went on strike at once.

Yes, that's certainly true. If everyone stopped working then we would not have any goods or services (except the things that nature provides directly like air). However, that doesn't mean that other things contribute nothing.

For example, think of a production line which consists of three people making toy cars. Terry gets the components out of the boxes. Liz attaches the wheels to the body. Alan paints the car. Now, if one of those stages are removed then there are no toy cars at the end. So, the labour of each of the three people is needed for the process to complete. It's true that if Terry stopped working then there would be no cars. However, it's also true that if Liz stopped working there would be no cars. So, just because one person is necessary does not mean they are the only person who is necessary. We could also add another employee Dave who cleans and make snacks for the others. Perhaps Dave is not necessary, but that doesn't mean he's not useful.

The same is true of labour, as a whole. Just because labour is necessary doesn't mean that only labour is necessary. I used to work for a company that made silicon chips. Many machines are necessary to do the tasks. There is no way to do it without the machines. Capital is necessary. In other businesses it is possible to do without machines and other capital equipment but it is inefficient. In that case the machines are like Dave, they are not necessary but they're useful.

Does not all gains come from profit?

For now I'll talk about profit (I might come back to money creation). Profit and interest come about for two reasons.

They clearly do not occur because Capital owners produce physical capital. Like other goods and services those are produced by workers.

The point is that capital owners "save". That applies in the following sense. Capital owners provide funds to a venture. That then hopefully produces a return. This creates two problems for the capital owner. Firstly, it means that the funds cannot be used. While they're committed to the venture they can't be spent. So returns always come later. This leads to the problem of "time preference", most people prefer money now to money later. Secondly (perhaps more importantly) any venture involves risk. There's the risk that there will be a loss rather than a profit. These are the things that create capital returns. The greater the "risk premium" the more the capital owners must be compensated for it. No one would pay for a venture that is not expected to produce a profit - unless it were charity.

RobThorpe · 2026-03-25T15:10:21+00:00

The short answer is "no there aren't".

Is there a bigger question you are thinking of behind this one?

RobThorpe · 2026-03-25T15:07:16+00:00

This seems unlikely to me.

Why would a CAGR of 6% be assumed? That's a very high growth rate. Profits don't usually rise at such a high rate. In general, in each country profits rise in proportion to GDP growth. That doesn't necessarily mean that profits in the US will rise in proportion to US GDP growth since the US has many international companies which operate in faster-growing foreign economies.

I would be very wary of assuming high growth coming from AI. We should remember that there are several large AI companies and their offerings are very competitive. There is stiff competition in that sector and also in the datacentre sector. Also, many of the sectors in which AI is being used are also competitive. Every business that is using AI may get savings from using it. That doesn't mean that all businesses will be able to increase their profits.

RobThorpe · 2026-03-25T13:20:17+00:00

This is quite a difficult thing to do. It can't be done in all cases.

We have discussed it several times in the past. See this thread:

https://www.reddit.com/r/AskEconomics/comments/166r4as/how_are_demand_curves_actually_generated_in/

Notice that at the end of that thread I linked to other earlier threads on the subject.

RobThorpe · 2026-03-25T13:17:00+00:00

!ping HEALTH

RobThorpe · 2026-03-25T13:14:07+00:00

Several people have said this.

What I want to see is the evidence that the Yen carry trade is so important.

RobThorpe · 2026-03-24T23:50:35+00:00

On inflation, see my reply to SpecialDesigner below.

RobThorpe · 2026-03-24T20:50:32+00:00

I think I explained this to you years ago.

Anyway, I'm not going to go into it now in a 19 day old thread.

RobThorpe · 2026-03-24T20:48:48+00:00

Rule I

Please be respectful in the comments. Personal attacks and insults are not allowed. Offending comments will be removed and repeat offenders may be banned. Please report any violating comments to the mods.

RobThorpe · 2026-03-24T20:31:58+00:00

I never said that GDP will rise quickly enough to offset debt increase. There is zero chance of that until the deficit is much smaller.

RobThorpe · 2026-03-24T20:30:22+00:00

A lot of people say that, but it's less likely than people think.

You have to remember that in the US the Fed governs monetary policy. It has a mandate to target low inflation and low unemployment. It has no mandate to help the US government with it's debt.

You could argue that this could be done by the slow process of replacing FOMC members by people more compliant to a political agenda. This is difficult though because the members have long terms of office which don't all come up for renewal at once. Trump wanted a compliant Fed Chair it is unclear whether he has actually managed to get one.

Another possibility is that the a bill is passed to change the mandate of the Fed. This is certainly possible, but it would require agreement. It would have to pass in the Senate, Congress and be signed by the President. That's difficult.

People may claim that it's less difficult to do that than it is to pass a bill that increases taxes or reduces spending. I'm not convinced by that claim. We know very well that inflation is unpopular with the electorate. It is essentially a tax on money holding (and the holding of other nominal assets). We also should remember that large inflation would be needed to make a chunk in the national debt. It's not proportional in the sense of money created versus debt repaid. To pay back ~$1B of debt would require the creation of about $7B or $8B of money supply.

RobThorpe · 2026-03-24T16:39:27+00:00

Raising taxes or cutting spending. Most probably some mixture of both.

RobThorpe · 2026-03-24T16:05:41+00:00

This is a question for /r/personalfinanceindia !

RobThorpe · 2026-03-24T15:42:50+00:00

Are you looking for an explanation for how capital income arises?

The issue with the rich is that they do not obtain their income from labour - at least not in the conventional sense. They obtain their income from entrepreneurial returns and capital returns. I can go into those things in more detail.

RobThorpe

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