U.S. Attempts to Restrain OPEC with “NOPEC”

A U.S. Senate committee is expected to pass the No Oil Producing and Exporting Cartels (NOPEC) bill on Thursday. The legislation could open members of the Organization of the Petroleum Exporting Countries (OPEC) and its partners to antitrust lawsuits for orchestrating supply cuts that raise global crude oil prices.

The bill is intended to protect U.S. consumers from gasoline and heating oil price spikes, but some analysts argue that it could also have unintended consequences.

The bipartisan NOPEC bill aims to change the U.S. antitrust law and revoke the immunity that has protected OPEC and its national oil companies from lawsuits. If passed into law, the U.S. attorney general will have authorization to sue OPEC and its members in federal court. Other producers like Russia, which works with OPEC in a wider group known as OPEC+ to withhold output, could also be sued.

Although it is still not clear how a U.S. federal court could enforce judicial decisions against a foreign nation, previous attempts to enact NOPEC over more than two decades have worried Saudi Arabia, the de facto leader of OPEC, leading it to lobby extensively every time a version of the bill has come up.

The Senate Judiciary Committee is expected to pass the most recent version of the bill on Thursday.

The bill would then have to pass the full Senate and House and be signed by the president to become law.

The bill still has a long way to go as the White House has not revealed whether Biden supports it. It is also not clear if there is enough support in the Congress.

Previous versions of the NOPEC bill have failed amid resistance by oil industry groups.

The chances of the bill becoming law is higher this time, however as there is anger among the Congress members about soaring gasoline prices that have helped drive inflation up to its highest levels in decades.

OPEC producers have rejected repeated requests by the U.S. and its allies to boost production as consumers re-emerge from the pandemic restrictions and Russia’s invasion of Ukraine keep oil prices surging.

Still, rushing a bill could lead to unforeseen blowback as affected countries could take similar action against the U.S. for example for withholding agricultural output to support domestic farming.

OPEC nations could also strike back in other ways.

In 2019, Saudi Arabia threatened not to use U.S. dollar in its oil trade if Washington passed a version of the NOPEC bill. Doing so would 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.

The country could also decide to buy at least some weapons from countries other than the United States, hitting a lucrative business for U.S. defense contractors.

The top U.S. oil lobby group, the American Petroleum Institute, has also opposed the NOPEC bill, saying it could hurt domestic oil and gas producers.

One industry concern is that NOPEC legislation could lead to overproduction by OPEC, bringing prices so low that U.S. energy companies have difficulty boosting output. Saudi Arabia and other OPEC countries have some of the world’s cheapest and easiest reserves to produce.

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