The No Oil Producing and Exporting Cartels (NOPEC) bill, which passed a Senate committee on May 5, is intended to protect American consumers and businesses from engineered oil spikes.
The Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, agreed to steep production cuts on Wednesday, limiting supply in an already tight market. Following the decision, the White House stated that it would consult with Congress on “additional tools and authorities” to reduce the group’s control over energy prices, a clear reference to potential NOPEC support. The White House had previously expressed reservations about the bill.
What is the NOPEC bill?
The bipartisan NOPEC bill would change antitrust law in the United States to remove the sovereign immunity that has shielded OPEC+ members and their national oil companies from lawsuits. If signed into law, the US attorney general would gain the ability to sue the oil cartel or its members in federal court, including Saudi Arabia.
It is unclear how a federal court could compel a foreign country to comply with judicial antitrust decisions. The US could also face criticism for attempting to manipulate markets, such as its planned release of 165 million barrels of oil from the emergency oil reserve between May and November.
Several attempts to pass NOPEC over the past two decades, however, have long concerned OPEC’s de facto leader, Saudi Arabia, prompting Riyadh to lobby hard every time a version of the bill was introduced.
The bill was passed by the Senate Judiciary Committee in May, but it still needs to be passed by the full Senate and House, as well as signed by the president, to become law. According to ClearView Energy Partners, a nonpartisan research organization, if introduced to the Senate floor, NOPEC would likely receive the 60 votes required to pass the 100-member chamber.
What are the new changes?
Previously, there have been several attempts to pass the NOPEC bill, worrying Saudi Arabia, the group’s de facto leader. Hence, they have been lobbying every time the bill comes up. Moreover, the previous versions also failed due to resistance by oil industry groups such as American Petroleum Institute (API), a top US oil lobby group. The bill “would create further instability in the marketplace and exacerbate existing challenges in international commerce. Such legislation would be unhelpful in any market condition past, present or future,” stated Mike Sommers. Sommers is the president and chief executive of API.
This time, with the Senate Judiciary Committee, passing the bill in May, it needs to pass before becoming law. As per ClearView Energy Partners, a nonpartisan research group, the bill will likely get 60 votes. Another concern is that the bill can lead to OPEC overproducing and reducing prices, hence causing US energy firms to have problems. Some analysts believe NOPEC may lead to an unintended blowback, pushing other nations to take similar actions.
Opposition from the oil industry groups
Previous versions of the NOPEC bill have failed due to opposition from oil industry groups, including the American Petroleum Institute, the nation’s leading oil lobbying organization (API). However, anger has grown in Congress over rising gasoline prices, which contributed to the highest level of fuel inflation in decades earlier this year.
Saudi Arabia has rebuffed repeated lobbying during visits by Biden officials not to cut production. Instead, OPEC+ agreed on Wednesday to cut output by the most since the beginning of the COVID-19 pandemic.
According to some analysts, NOPEC could have unintended consequences, such as other countries taking similar action against the US for withholding agricultural output to support domestic farming.