Take a fresh look at your lifestyle.

- Advertisement -

Analysis | Why ‘NOPEC’ keeps popping up as a US response to OPEC

For nearly two decades, lawmakers in Washington have promoted legislation that would curb the Organization of the Petroleum Exporting Countries. Faced with an almost certain presidential veto, the proposal never made it to the finish line. Now the legislation is taking on a new look amid rising gasoline and oil prices and OPEC+’s decision to lower production caps by 2 million barrels per day.

1. What would the legislation do?

The bill — dubbed the “No Oil Producing and Exporting Cartels Act” or “NOPEC” — would give the US Department of Justice the power to file an antitrust lawsuit against OPEC for trying to control oil production or lower the price of oil. affect crude oil. It would do this by amending the Sherman Antitrust Act of 1890, the law used more than a century ago to split John D. Rockefeller’s oil empire. Even if the Justice Department never acted on its power to sue, the existence of this option could be enough to force the cartel to change its behavior.

2. Does this have a chance to become law?

Following the cuts announced by OPEC+, President Joe Biden’s administration suggested it might be willing to back the bill, which enjoys broad support from both parties. Senate Majority Leader Chuck Schumer said the bill is one of the legislative tools being looked at in response to the cartel’s production cut. Democratic Senator Dick Durbin, chairman of the chamber’s Judiciary Committee, has called for the legislation to be passed when Congress returns after the midterm elections in November. The committee’s top Republican, Senator Chuck Grassley, has said he will introduce the bill as an amendment to a popular defense spending bill. The committee approved the legislation by a vote of 17-4 in May, but the Biden administration expressed concern about the unintended consequences of the legislation, as the war in Ukraine fueled volatility in energy markets.

3. Is this as far as the bill has ever come?

No. Versions of the bill were approved by the United States House of Representatives and the Senate in 2007, but the idea fell through under a veto threat from President George W. Bush. Former President Donald Trump supported the NOPEC idea before taking office, and OPEC was a frequent target of him on Twitter, but during his four-year term, the legislation was never put to a vote in either chamber.

Both the American Petroleum Institute and the US Chamber of Commerce have strongly opposed the bill, fearing retaliation against US companies abroad if it becomes law. US shale producers also benefit from OPEC’s discipline to raise prices.

5. What are the possible consequences for the oil market?

The consultancy ClearView Energy Partners said in a research note that “signs of the government’s intent to use new powers that NOPEC would grant – a dramatic intervention – could cause OPEC+ to reconsider and potentially abandon its ‘market balancing’ role, leading to a dramatic sell-off and the exhaustion of global spare capacity.”

More stories like this are available at bloomberg.com

Leave A Reply

Your email address will not be published.