NOPEC Bill Would Weaken American Energy Dominance, Not Foreign Oil Producers
In early-February, in a move intended to weaken the fourteen-nation oil producer group known as OPEC, the House Judiciary Committee, now led by Democrats, advanced the “No Oil Producing and Exporting Cartels Act” (NOPEC). The legislation would make OPEC the subject of possible antitrust action by the Department of Justice. The bill would also revoke the sovereign immunity that has long shielded OPEC countries from U.S. legal action.
The problem? The NOPEC law, if passed, would weaken the U.S., not foreign oil powers.
Targeting OPEC with the rhetoric of breaking up the global oil cartel isn’t a novel approach. Variations of such legislation date back decades. Fortunately, past presidents have stepped in before targeting foreign oil producers backfired on U.S. consumers. President Trump, however, could give the idea an audience - or even legs - given his penchant for attacking OPEC through social media.
NOPEC’s premise doesn’t sound far-fetched: stop OPEC’s fourteen nations from coordinating production and influencing oil prices and score a victory for consumers. Only the reality is much more complicated.
For starters, passing NOPEC could damage President Trump’s “Energy Dominance” agenda. At best, the move could cause unintended consequences in global oil markets, with oil-producing nations responding in their own self-interest. At worst, the gambit could backfire completely, undercutting America’s current leading role as a net exporter of oil.
Consider the state of American oil production. As of November, the U.S. oil sector was pumping out a record 11.6 million barrels per day. U.S. crude exports also reached a record high of 2.4 million barrels per day. In fact, the Energy Information Administration last year found the U.S. now exceeds Russia and Saudi Arabia as the world’s largest crude producer.
Put simply, the American oil business is booming and American energy security is strengthening, with petroleum net imports hitting their lowest monthly level in more than 50 years. For consumers, this means downward pressure on gasoline prices and a weakened market position for OPEC nations. Upsetting the apple cart in the midst of this success by passing NOPEC could be dangerous, interrupting and possibly even undercutting the momentum of U.S. oil companies.
Passing NOPEC could also lead to market instability. “Overall, we believe that if such legislation moved forward, it would threaten the sustainability of the OPEC and OPEC+ grouping, add more volatility to the market, and make the perceived floor under prices even more fragile,” added Michael Cohen of Barclays in a research note. Given the roller coaster ride of recent weeks, do U.S. markets really need additional volatility?
Finally, targeting OPEC could result in serious retaliation that hurts both the U.S. and domestic oil producers. For example, OPEC nations could not only refuse to work with American oil and gas firms, but they and their allies, including Russia, could hurt the U.S. by pulling assets out of the country or simply replacing U.S. imports with goods from elsewhere. Consider a scenario in which an OPEC nation reacts to U.S. action on oil by limiting import of U.S. agricultural products.
The broadness of the bill also poses dangers. For example, the legislation is supposed to target OPEC nations, but it could end up involving other nations and companies that do business with OPEC nations. The language is so broad, in fact, that it could be used to sue non-OPEC states and even U.S. energy companies that do business with OPEC members. There is even a possibility that DOJ actions could cascade into private torts filed against energy firms that do business with OPEC defendants. The diversity of danger to the U.S. should trouble policymakers.
While the White House has declined to take a position on NOPEC, others have not. The U.S. Chamber of Commerce has pointed out that “antitrust cases involving nation-state commercial activity can already be brought under existing law,” and therefore would create significant legal problems for our government. That’s yet another reason to pump the brakes on NOPEC and consider wiser options.
Soon, the Senate Judiciary Committee, led by Sen. Lindsey Graham, could have a chance to determine NOPEC’s fate. Let’s hope he understands that moving ahead with targeting OPEC would not only weaken President Trump’s “Energy Dominance” agenda, but could create a chilling effect on foreign investment in America’s energy sector and undercut the U.S.’s ability to remain a leading oil exporter.
Those are serious implications. We are counting on him and others to allow wisdom to prevail in stopping NOPEC’s momentum before real damage is done.
Charles Larson Jr. is the former U.S. Ambassador to Latvia.