Oil and politics are intertwined. Raw emotions are evoked when oil is in question. Issue of crude prices, dependence on unstable regions of the world are all closely linked and interrelated. These hit raw nerves and politics thrives.
Politicians love it, for oil not only fills the national coffers, through additional and even additional taxes, it also helps play up nationalistic sentiments, very, very easily.
This old game is being played once again. The US House of Representatives last week voted to allow Washington to sue OPEC over oil production quotas.
The measure passed 345-72. “We don’t have to stand by and watch OPEC dictate the price of gas,” Judiciary Committee Chairman John Conyers, the bill’s chief sponsor, declared. He accused the OPEC of engaging in a “price fixing conspiracy” that has “unfairly driven up the price” of crude.
The measure, if and when adopted by the White House, could change antitrust laws so that the Justice Department can sue OPEC member countries for price-fixing, and would remove the immunity provided to a sovereign state against such lawsuits.
A similar version of the bill, sponsored by Democrat Kerb Kohl of Wisconsin and Republican Arlen Specter of Pennsylvania, passed the Senate Judiciary Committee last month. But it is unclear if the full Senate will act on the bill. It is even further unlikely that President Bush would sign the bill into legislation.
This is not new. Such politics has been played earlier too. While the “first oil shock” of the 70s was still in memories, a labor group sued OPEC in 1978 under the Sherman Antitrust Act. However, a US appeals court rejected the case in 1981.
The issue remains. Suing doesn’t help. It further worsens the market sentiments. And in the oil business, sentiments have a lot role to play.
With the US summer driving season just round the corner, and prices at the gas station reacting heavily to the cross currents, the politician in Conyers needed a scapegoat. And who else could be a better scapegoat than OPEC.
A number of market analysts hence differed with the House.
Gasoline prices “may ease somewhat,” Guy Caruso, chief of the Energy Department’s statistical arm, told the House Energy and Commerce investigations subcommittee. Yet he argued gas prices will remain strong “with the hurricane season approaching, continued tight refinery conditions, low gas inventories and increased demand for summer travel.”
The fact remains, the latest price surge at the pump may have had little to do with OPEC oil production. At the hearing, William Kovacic, a member of the US Federal Trade Commission argued, “increased crude oil prices have played a relatively minor role in (the recent) increase in retail prices.” He said the price of benchmark West Texas crude increased no more than 15 cents a gallon over the last three months, while retail gas prices jumped 80 cents to 90 cents a gallon, depending on location. _Bart Stupak, the panel’s chairman while arguing, said: “Big Oil is often quick to blame world crude oil prices, but that argument doesn’t appear to be the full story.” And the bill went through.
Some are already terming the legislation as “piece of noisy US politics.” Industry analysts argue if the US tried to implement the Bill, it would mean less oil for Americans rather than more.
“This is a good piece of noisy US politics. It would be better for the House of Representatives to look at the US failure to operate its refineries at full capacity,” Peter Ross of London consultancy firm Wimbledon Energy was quoted as saying by the press. Energy economist AF Alhajji, an associate professor at Ohio Northern University, described the vote as “nonsense,” and these have nothing to do with OPEC. High oil prices are the result of “30 years’ worth of political and economic events,” including US-led sanctions on oil producers such as Libya, Iraq and Iran, he said. And even if the US adopted the Bill into law, “it will be impossible to apply,” added Alhajji
Russia also digged in saying the US House of Representatives broke international law when it passed the bill. “This decision is a violation of the norms of international law,” a statement from the Russian foreign ministry said.
OPEC’s position is also very clear. There are no problems from the supply side, they insist and argue.
“The surge in oil prices is being driven by political factors and there is no need for additional crude supplies, Saudi Arabia’s Assistant Oil Minister Prince Abdul Aziz bin Salman bin Abdul Aziz said Monday. “We have a well-supplied market.”
“What brings prices up is politics, what brings them down is politics,” he emphasized, referring to tensions in major crude producers Nigeria, Iraq, Iran and Venezuela.
“We have always said, and OPEC has always committed itself to keep the market well-supplied and balanced. Never has this market been (more) balanced with crude than today,” said Prince Abdul Aziz. He argued there was no need for additional crude supplies, there is a problem with refining capacity.
It seems the entire effort at the House was to score points, to appear doing something, while not ready to take the measures required to resolve the issue. There are no quick fixes to the problem.
Regretfully the US House of Representatives failed to take cognizance and act on the real needs of the market. And this is still more regretful because it came from a group supposed to be pretty well informed. But this is what politics is — what else?
