https://macropaperwarehouse.com/authors/simon-johnson/Simon JohnsonHugo -- gohugo.ioen-usThu, 01 Jan 2026 00:00:00 +0000https://macropaperwarehouse.com/papers/a-theory-of-price-caps-on-non-renewable-resources/Thu, 01 Jan 2026 00:00:00 +0000https://macropaperwarehouse.com/papers/a-theory-of-price-caps-on-non-renewable-resources/<p>This paper asks what the optimal response of an exhaustible-resource producer is to sanctions in the form of a price cap, and how a sanctioning coalition should set the cap. The motivation is the $60-per-barrel cap on seaborne Russian crude imposed by the G7, EU and Australia in December 2022 (with $100/barrel for high-value and $45/barrel for low-value refined products), whose stated aim was to cut Russian revenue without triggering a global supply shock. The authors (two of whom were involved in designing the policy) argue that static models, frictionless Hotelling models, and truncated-supply-curve intuitions are all inadequate, and build a dynamic structural model.</p>