The House Judiciary Committee, now led by Democrats, recently advanced the “No Oil Producing and Exporting Cartels Act”. That sets the bipartisan “NOPEC” bill, which would subject the cartel to possible antitrust action by the Department of Justice, up for a possible House vote.
A similar bill targeting OPEC was also introduced in the Senate by Senators Chuck Grassley, a Republican backer of the corn-based motor fuel ethanol, and Amy Klobuchar, a Democrat who is expected to announce soon whether she is running for president in 2020. The bill has appeared in Congress in various forms over the last 20 years.
The Organization of Petroleum Exporting Countries’ members “deliberately collude to limit crude oil production as a means of fixing prices, unfairly driving up the price of crude oil,” Jerrold Nadler, House Judiciary Committee Chairman said before voting in favor of the legislation. The law would amend the Sherman Antitrust Act of 1890, the law used more than a century ago to break up the oil empire of John Rockefeller.
But the Vienna-based OPEC which includes the world’s top crude exporter Saudi Arabia, says it is not a cartel but rather a production group. Mohammad Barkindo, OPEC Secretary-General said the exporting group was not in the business of manipulating or fixing oil prices.
“We are not in the business of manipulating or fixing prices, therefore it would be a misjudgment to accuse us of such,” Barkindo said on the sidelines of an energy forum in Cairo.
Various iterations of the bill have been proposed in the past, and former presidents have threatened to use their veto power to scupper the legislation. But President Donald Trump could be more amenable, given his frequent attacks accusing the cartel of keeping oil prices artificially high. Trump supported NOPEC in his book “Time to Get Tough” published in 2011 before he became president, but he has not publicly commented on the bill while in office.
“I am not going to predict if it will get passed and enacted into law, but I think its prospects are pretty good,” said Seth Bloom, former general counsel of the Senate Antitrust Subcommittee. “OPEC does not have too many friends right now and the legislation may likely have a friend in the White House given Trump has written favorably about it in the past.”
Makan Delrahim, US Assistant Attorney General told members of a House subcommittee in December the administration “continues to study” the legislation.
“If OPEC members conducted the same manipulation in the United States that they practice in Vienna, they could be prosecuted,” said Robbie Diamond, who heads up Securing America’s Future Energy. “Their actions have a profound impact on US consumers, businesses and our military, and our government can no longer allow that.”
But the American Petroleum Institute, the top lobbying group for US oil and gas drilling, has opposed the NOPEC bill, saying it could expose diplomatic, business and military interests to retaliation.
Mike Sommers, API President and Chief Executive said the bill was “populist” and the group would work with the House and Senate leadership to tell them that the US shale oil revolution, which has helped make the country the world’s top oil producer, has helped combat OPEC.
“We are no longer held hostage by the oil cartel in Vienna,” Sommers said.
Michael Cohen, Barclays analyst said in a research note that the appetite for advancing the bill was likely subdued while oil prices were low. But if it did pass, the legislation would threaten the sustainability of coordinated supply actions by OPEC, and OPEC plus Russia, and add more volatility to the market.
OPEC had resorted to co-opting other oil producers to maintain its firm hold on oil, putting in place a deal since 2017, aimed at reining in a global supply overhang. It has been extended several times and, under the latest deal, participants are cutting output by 1.2 million bpd until the end of June 2019.
OPEC and its allies will meet on April 17 and 18 in Vienna to review the pact. Alexander Novak, Russian Energy Minister, said they could discuss a charter outlining open-ended cooperation during the meeting.
FRANK UZUEGBUNAM
