RIYADH: Anti-OPEC legislation going through the US congress could harm President Joe Biden’s efforts to bring stability to the oil markets, the White House has warned
A spokesperson for the administration said there are concerns over the “unintended consequences” of the move, which would give powers to US prosecutors to sue organizations for perceived anti-competitive actions in the oil markets.
When Congress passed a version of the bill in 2007, it died under veto threat from President George W. Bush who said it could lead to oil supply disruptions as well as “retaliatory action against American interests.”
The Senate Judiciary Committee has voted 17:4 to approve the No Oil Producing and Exporting Cartels Act, in a signal of the growing tension between the US and the Organization of Petroleum Exporting Countries and its allies, known as OPEC+.
The organization has been resisting calls from the US to sign off a dramatic increase in output amid a surge in energy prices.
On Thursday, OPEC+ agreed to stick to plans for a gradual oil output increase — amounting to 432,000 barrels per day in June.
White House Press Secretary Jen Psaki was quoted by Bloomberg as saying that while Biden does not outright oppose the bill, “the potential implications and unintended consequences of this legislation require further study and deliberation.”
“We are taking a look at it and certainly have some concerns about what the potential implications could be,” she added.
Concerns over the bill — forms of which have been around for around 20 years — were also voiced by Mike Sommers, president of American Petroleum Institute.
He agreed there could be “serious, unintended consequences”, including giving OPEC members the green light to issue such measures on US firms.
The growing tension between the US and OPEC+ prompted former Saudi Intelligence chief Prince Turki Al-Faisal to insist it is the policies of the White House that are responsible for the country’s energy price rises.
In an interview with Arab News' Frankly Speaking with Katie Jensen, the Prince said: “When you say that Saudi Arabia has not budged on the issue of the oil problems that America is facing, basically America itself is the reason for the state that they’re in because of their energy policy.”
This view was shared by Republican senator Ted Cruz, who spoke out during a debate on the legislation.
“It is important for the American people to understand that the cause of the high prices at the gas pump right now is not Opec,” he said, saying the Democrats "desperately trying to find a bad guy” for high oil prices.
Another Republican senator, John Kennedy, said Biden “does not want America to produce its oil and gas,” which has given increased market power to OPEC.
The decision by OPEC+ to sign off a modest production rise came a day after the EU proposed a phased oil embargo on Russia in its toughest measures yet to punish Moscow for its war in Ukraine.
EXPLAINER-Why NOPEC, the U.S. bill to crush the OPEC cartel, matters
WHAT IS THE NOPEC BILL?
The bipartisan NOPEC bill https://www.congress.gov/bill/117th-congress/senate-bill/977 would change U.S. antitrust law to revoke the sovereign immunity that has long protected OPEC and its national oil companies from lawsuits.
If signed into law, the U.S. attorney general would gain the ability to sue the oil cartel or its members, such as Saudi Arabia, in federal court. Other producers like Russia, which works with OPEC in wider group known as OPEC+ to withhold output, could also be sued.
It is unclear exactly how a federal court could enforce judicial antitrust decisions against a foreign nation. But several attempts at NOPEC over more than two decades have worried OPEC's de facto leader Saudi Arabia, leading Riyadh to lobby hard 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.
To become law, the bill would then have to pass the full Senate and House and be signed by the president.
The White House has not indicated whether President Joe Biden supports the bill, and it is not clear whether the bill has enough support in Congress to get that far.
WHAT'S CHANGED NOW?
Previous versions of the NOPEC bill have failed amid resistance by oil industry groups like the American Petroleum Institute.
But anger has risen lately in the U.S. Congress about soaring gasoline prices that have helped fuel inflation to the highest level in decades, raising the chances of its success this time.
OPEC producers have rebuffed requests by the United States and allies to open the oil taps by more than gradual amounts as global consumers emerging from the COVID-19 pandemic and Russia's invasion of Ukraine keep oil prices boiling.
Russia, which typically has produced about 10% of the world's oil, could see crude output drop as much as 17% this year as Moscow struggles with Western sanctions.
Some analysts said that rushing a bill through could lead to unintended blowback, including the possibility that other countries could take similar action on the United States for withholding agricultural output to support domestic farming, for example.
"It's always a bad idea to make policy when you are angry," said Mark Finley, a fellow in energy and global oil at Rice University's Baker Institute and former analyst and manager at the Central Intelligence Agency.
OPEC nations could also strike back in other ways.
In 2019, for example, Saudi Arabia threatened to sell its oil in currencies other than the dollar 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 kingdom 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.
In addition, the kingdom and other oil producers could limit U.S. investments in their countries or simply raise their prices for oil sold into the United States - undermining the basic aim of the bill.
The United States and its allies are already facing big challenges securing reliable energy supplies, said Paul Sullivan, a Middle East analyst and non-resident senior fellow at the Atlantic Council's Global Energy Center. "The last thing we need to do is to throw a grenade into this."
U.S. OIL INDUSTRY OPPOSED
The top U.S. oil lobby group, the American Petroleum Institute, has also come out against the NOPEC bill, saying it could hurt domestic oil and gas producers.
One industry concern is that NOPEC legislation could ultimately 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.
A wave of oil from OPEC producers, even at a time of concerns about Russian supply, "could chill drilling activity in the U.S. oil patch, potentially putting both domestic energy security and domestic economic recovery at risk," said ClearView Energy Partners, a nonpartisan research group in a note to clients.
(With input from Reuters)