The White House has cautioned that anti-OPEC legislation currently pending in the US Congress could jeopardize President Joe Biden’s efforts to restore oil market stability.
The administration’s spokeswoman expressed alarm about the “unintended implications” of the measure, which would allow US prosecutors to sue companies for alleged anti-competitive behavior in the oil markets.
When Congress enacted a version of the bill in 2007, President George W. Bush threatened to veto it, claiming it would cause oil supply problems and “retaliatory measures against American interests.”
The No Oil Producing and Exporting Cartels Act was approved 17:4 by the Senate Judiciary Committee, signaling escalating tensions between the US and the Organization of Petroleum Exporting Countries and its supporters, known as OPEC+.
The organization has resisted efforts from the United States to approve a substantial increase in output in the face of rising energy prices.
On Thursday, OPEC+ agreed to continue to its plans for gradually increasing oil output, which will reach 432,000 barrels per day in June.
While Biden does not oppose the bill outright, White House Press Secretary Jen Psaki told Bloomberg that “the potential implications and unintended consequences of this legislation require further study and deliberation.”
“We’re looking into it,” she said, “and we’re concerned about the potential consequences.”
Mike Sommers, president of the American Petroleum Institute, expressed reservations about the bill, which has existed in various incarnations for nearly two decades.
He agreed that there could be “severe, unforeseen repercussions,” such as allowing OPEC members to impose such sanctions on US companies.
The rising tensions between the United States and OPEC+ spurred former Saudi intelligence chief Prince Turki Al-Faisal to claim that the White House’s policies are to blame for the country’s rising energy prices.
Frankly, in an interview with Arab News, “When you say that Saudi Arabia has not budged on the matter of the oil troubles that America is facing,” the Prince told Katie Jensen, “essentially America is the reason for the position that they’re in because of their energy strategy.”
Continue reading: Saudi Arabia is not to blame for the United States’ rising energy costs, according to Prince Turki Al-Faisal.
Senator Ted Cruz, a Republican, expressed similar sentiments during a discussion on the bill.
“It’s critical for the American people to realize that the source of high gas prices right now is not Opec,” he said, adding that Democrats are “desperately looking for a bad guy” to blame for high oil costs.
Biden, according to another Republican senator, “does not want America to develop its own oil and gas,” which has given OPEC more market power.
OPEC+’s decision to sign off on a modest production cut The increase came a day after the EU recommended a phased oil embargo on Russia, one of the heaviest sanctions against Moscow yet for its war in Ukraine.
EXPLAINER-Why is NOPEC, the US bill to destabilize the OPEC cartel, important?
WHAT DOES THE NOPEC BILL ENTAIL?
The bipartisan NOPEC bill (https://www.congress.gov/bill/117th-congress/senate-bill/977) would amend US antitrust law to strip OPEC and its national oil firms’ sovereign immunity from lawsuits.
If passed into law, the US attorney general would be able to sue the cartel or its members in federal court, including Saudi Arabia. Other producers, including as Russia, which collaborates with OPEC in the OPEC+ alliance to limit output, might be sued as well.
It’s not apparent how a federal court would enforce antitrust findings against a foreign country. However, OPEC’s de facto leader Saudi Arabia has been concerned about previous attempts at NOPEC over the past two decades, prompting Riyadh to lobby hard every time a version of the law has been proposed.
On Thursday, the Senate Judiciary Committee is likely to vote on the most recent version of the bill.
The bill would then need to pass both the Senate and the House of Representatives before being signed by the president.
President Joe Biden has not stated if he supports the bill, and it is unclear whether it has enough support in Congress to reach that far.
WHAT HAS NOW CHANGED?
Previous iterations of the NOPEC bill failed due to opposition from oil industry organizations such as the American Petroleum Institute.
However, discontent in the US Congress has recently grown over rising gasoline costs, which have helped fuel inflation to its highest level in decades, increasing the prospects of success this time.
As global consumers recover from the COVID-19 pandemic and Russia’s invasion of Ukraine keep oil prices rising, OPEC producers have refused pleas from the US and allies to open the oil taps by more than modest amounts.
Russia, which generally produces around 10% of the world’s oil, might see its crude output decline by as much as 17% this year as a result of Western sanctions.
Some analysts believe that hurrying a measure through could have unexpected consequences, such as other countries taking similar action against the US, such as delaying agricultural output to promote domestic farming.
“It’s never a good idea to develop policy while you’re upset,” said Mark Finley, a Rice University Baker Institute fellow in energy and global oil and a former analyst and manager at the Central Intelligence Agency.
OPEC countries could possibly retaliate in other ways.
Saudi Arabia, for example, threatened to sell its oil in non-dollar currencies if Washington passed a version of the NOPEC bill in 2019. As a result, the dollar’s standing as the world’s principal reserve currency would be jeopardized, Washington’s weight in global trade would be diminished, and Washington’s capacity to impose sanctions on nation states would be weakened.
The kingdom may also elect to acquire weapons from countries other than the United States, potentially disrupting a lucrative market for American defense contractors.
Furthermore, the monarchy and other oil producers might restrict US investment in their countries or simply raise their pricing for oil sold to the US, undermining the bill’s main goal.
According to Paul Sullivan, a Middle East specialist and non-resident senior fellow at the Atlantic Council’s Global Energy Center, the US and its allies are already facing significant hurdles in securing reliable energy supply. “Throwing a grenade into this is the last thing we need to do.”