Prof. ST Hsieh
Director, US-China Energy Industry Forum
May 5, 2022
OPEC was founded in the 1960’s and flexed the muscle during the oil embargo against west in the 1970’s. If the world has been dedicated to the principle of free-trade, OPEC should be abolished because it is an oil producers club that artificially manipulated the production quota and controls the global oil market. OPEC effectively weaponized oil for all these years. But OPEC holds the gun and bullets, industrialized nations have had to tolerate and deal with OPEC.
Of course, there were movements opposing OPEC, especially after the 2001, 911 terrorists attacked US mainland. Most of the terrorists were from Saudi, the leader of OPEC. Survivals and the families of 911 victims still waiting for the US government to allow them to sue the Saudi government, which would be a multi-billion dollars case. NOPEC should the precursor of this major legal battle.
NOPEC gained momentum after the successful shale revolution in the US. Since then, US became a net energy exporter nation: US oil is competing for global market share vs OPEC oil. Now US LNG export is poised to exclusively replace Russian pipeline gas soon.
In the meantime, OPEC has expanded to OPEC+ with the addition of Russia. Trump administration was able to work with OPEC+ stabilized the global oil market. But the recent Ukraine war has caused confrontations between US and OPEC+. Biden administration is being bogged down by high inflations that could be blamed on sustained high crude oil price. Biden administration has openly called OPEC+ to rapidly increase crude output. Unfortunately, Biden’s call has not been answered. So is this renewed interest in the US congress for moving the NOPEC bill forward. But as the following news reports indicated, NOPEC is not a sure bet yet.
Obviously, Ukraine war has raised tensions between the US and OPEC+, but it does not look possible for Biden administration to support such a bold move like NOPEC. Biden has his hands full and NOPEC will cause more challenges than opportunities for the US.
U.S. Senate committee passes antitrust bill pressuring OPEC
Thu, May 5, 2022, 6:31 AM
WASHINGTON (Reuters) -A U.S. Senate committee passed a bill on Thursday that could expose the Organization of the Petroleum Exporting Countries and partners to lawsuits for collusion on boosting crude oil prices.
The No Oil Producing or Exporting Cartels (NOPEC) bill sponsored by senators, including Republican Chuck Grassley and Democrat Amy Klobuchar, passed 17-4 in the Senate Judiciary Committee.
White House spokesperson Jen Psaki said the administration has concerns about the “potential implications and unintended consequences” of the legislation, particularly amid the Ukraine crisis. She said the White House is still studying the bill.
Versions of the legislation have failed in Congress for more than two decades. But lawmakers are increasingly worried about rising inflation driven in part by prices for U.S. gasoline, which briefly hit a record above $4.30 a gallon this spring.
“I believe that free and competitive markets are better for consumers than markets controlled by a cartel of state-owned oil companies … competition is the very basis of our economic system” Klobuchar said.
NOPEC would change U.S. antitrust law to revoke the sovereign immunity that has long protected OPEC and its national oil companies from lawsuits.
The bill must pass the full Senate and House and be signed by President Joe Biden to become law.
If passed, the U.S. attorney general would gain the ability to sue OPEC or its members, such as Saudi Arabia, in federal court. Other producers like Russia, which works with OPEC in wider group known as OPEC+ to withhold output, could also be sued.
Saudi Arabia and other OPEC producers have rebuffed requests by the United States and other consuming countries to boost oil production beyond gradual amounts, even as oil consumption recovers from the COVID-19 pandemic and Russian supply falls after its invasion of Ukraine.
OPEC+, which cut production when oil prices crashed to historic lows when the pandemic slashed oil demand, agreed on Thursday to stick to its existing plans to reverse the curbs with modest increases for another month.
NOPEC is intended to protect U.S. consumers and businesses from engineered spikes in the cost of gasoline, but some analysts warn that implementing it could also have some dangerous unintended consequences.
In 2019, Saudi Arabia threatened to sell oil in currencies other than the dollar if Washington passed NOPEC, a move that could undermine the dollar’s status as the world’s main reserve currency, reduce Washington’s clout in global trade and weaken its ability to enforce sanctions on nation states.
Senator John Cornyn, a Republican from the top U.S. oil producing state Texas, opposed the bill, saying it could prompt OPEC to restrict shipments to the United States.
“If we really want to deal with price at the pump we ought to produce more oil and gas here in America,” Cornyn said.
The bill is also opposed by the American Petroleum Institute, the top U.S. oil and gas lobbying group. In a letter to the committee’s leaders, API said NOPEC “creates significant potential detrimental exposure to U.S. diplomatic, military and business interests while likely having limited impact on the market concerns driving the legislation.”
Some analysts have cautioned that NOPEC could ultimately harm domestic energy companies if it pressures Saudi Arabia and other OPEC members to flood global markets with oil, because they produce oil much more cheaply than U.S. companies do.
White House Concerned About OPEC Antitrust Bill, Psaki Says
Ari Natter and Justin Sink
Thu, May 5, 2022, 3:51 PM
(Bloomberg) — The White House is concerned about legislation gaining momentum that would allow the U.S. to sue the Organization of the Petroleum Exporting Countries for manipulating energy markets.
“The potential implications and unintended consequences of this legislation require further study and deliberation, particularly during this dynamic moment in the global energy markets brought about by President Putin‘s invasion of Ukraine,” White House Press Secretary Jen Psaki said Thursday. The White House has no official position yet on the bill, she said.
Oil prices at historic highs are bolstering a decades-long effort to subject OPEC to U.S. antitrust laws. A vote Thursday by the Senate Judiciary Committee paves the way for full Senate consideration. The House Judiciary Committee approved its own version of the bill last year.
While the so-called Nopec bill has been introduced many times over the past two decades — never to any avail — it now comes as record pump prices stoke already historic inflation.
Whether such a measure could actually rein in runaway prices is another matter. The oil market has been upended since the bill last gained traction in 2019, reshaped by a global pandemic that briefly destroyed demand, and a supply war between Saudi Arabia and Russia that flooded the market with crude and helped send oil futures below zero for the first time ever.
Now, the world is short on oil, with Russia frozen out of international trade and OPEC and its allies contending with capacity constraints that limit their ability to raise output. The U.S., as the world’s No. 1 oil producer, has the most power to tame prices by raising production, but companies enjoying historic profits are reluctant to accelerate growth.
It’s unclear when, or if, Senate Majority Leader Chuck Schumer will bring the measure, authored by Iowa’s conservative Republican Chuck Grassley, to the floor.
“Obviously OPEC is a problem,” Schumer said last week, adding that he’s more focused on forthcoming legislation to beef up the Federal Trade Commission’s authority to go after gasoline price manipulation.
When Congress passed a version of the bill in 2007, it died under veto threat from President George W. Bush who said it could lead to oil supply disruptions as well as “retaliatory action against American interests.”