The U.S. Senate Judiciary Committee has approved the No Oil Producing and Exporting Cartels Act (NOPEC) bill, Reuters reports, paving the way-if signed into law by the president-for a lawsuit against OPEC for antitrust behavior and market manipulation.
The Thursday vote saw the U.S. Senate panel come out in favor of NOPEC, which has been on and off the table for decades, failing to get past Congressional committees until recently, when gasoline prices in the U.S. have maintained all-time highs.
It is still unclear whether the bill, approved by the Senate panel, will move on to the Senate or to U.S. President Joe Biden. It is also unclear whether Biden would sign this legislation into law.
Opposition to NOPEC by major trade groups, including the U.S. Chamber of Commerce and the American Petroleum Institute (API) has intensified in recent weeks and months. They fear it could backfire on America's oil and gas industry and U.S. interests.
The vote comes at a tense time for U.S-Saudi relations, with Saudi Arabia making it very publicly known-through interviews and op-eds-that it is unhappy with the lack of support offered by the Biden Administration for Saudi defense against Iran-backed Houthis in Yemen, despite the threat Houthi attacks pose to Saudi oil facilities.
On Wednesday, the Wall Street Journal published a story headlined "U.S. Saudi Relations Finally Start to Thaw", but a NOPEC vote that would make it possible for the United States to sue OPEC is likely to have a detrimental effect on that alleged thaw.
Also on Wednesday, news reports emerged that CIA director Bill Burns had met in secret with Saudi Crown Prince Mohammad bin Salman in April to try to "patch" things up.
By Charles Kennedy for Oilprice.com
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Comments
If it becomes a law and the United States tries to sue OPEC or any of its members, the organization could simply stop all its oil exports to the US. NOPEC has only jurisdiction in the United States but no extraterritorial jurisdiction under international law.
If, however, the United States persists with mounting law suits against OPEC or its members, then they could retaliate by withdrawing their investments and funds in the US and even threaten to replace the petrodollar with the petro-yuan in their oil transactions. That would be the biggest ever retaliation against the US. Even the United States allies (if there any left in the Arab Gulf) will turn against it.
Furthermore, OPEC isn’t a cartel. A cartel is defined as an association of manufacturers and suppliers whose goal is to increase their collective profits by means of price fixing, limiting supply, preventing competition or other restrictive practices.
How could OPEC be a cartel when it was founded as a counterweight against the previous “Seven Sisters” cartel of Western multinational oil companies which dominated every aspect of global oil through price fixing, limiting supplies and suppressing competition for the sole purpose of maximizing its profits. The main purpose behind the founding of OPEC was to give producers more control over their own oil.
OPEC has never once tried to fix a specific price nor has ever been able to achieve this goal. For instance, OPEC was not able to prevent prices from falling in the 1980s even after it adopted the production quota system in 1982. Moreover, OPEC was neither able to temper oil prices in 2008 when prices rocketed to $147 a barrel nor was it able to stop the 2014 oil price crash.
When it comes to limiting oil supply, a true cartel like the “Seven Sisters” was able to do exactly that because it was virtually in control of global oil resources. OPEC has never been in such a situation. It only accounts for 70.1% of global proven reserves, 34.7% of the global oil market and 30.8% of exports. The United States and Russia account for 12% each.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London