OPEC Is Under Pressure After U.S. Senate Passed An Antitrust Bill

On Thursday, a US Senate committee approved a measure that could expose the Organization of the Petroleum Exporting Countries and its allies to litigation for colluding in artificially inflating crude oil prices.

The Senate Judiciary Committee approved the No Oil Producing or Exporting Cartels (NOPEC) measure, which was backed by senators including Republican Chuck Grassley and Democrat Amy Klobuchar.

White House spokeswoman Jen Psaki said that the government is concerned about the legislation's "possible ramifications and unintended repercussions," especially in light of the Ukraine conflict. She said that the White House is currently reviewing the legislation.

For over two decades, several versions of the legislation have failed in Congress. However, politicians are becoming more concerned about rising inflation, which is being fueled in part by rising gasoline costs in the United States, which temporarily exceeded $4.30 per gallon this spring.

"I think that open and competitive markets benefit consumers more than markets dominated by a cartel of state-owned oil firms... competition is the bedrock of our economic system," Klobuchar said.

NOPEC would amend US antitrust law to abolish OPEC and its member countries' sovereign immunity from litigation.

To become law, the bill must pass the whole Senate and House of Representatives and be signed by Vice President Joe Biden.

If enacted, the US attorney general would obtain the authority to prosecute OPEC or its members in federal court, including Saudi Arabia. Other producers, including Russia, which collaborates with OPEC in a larger organization called OPEC+ to restrain production, might also be sued.

Saudi Arabia and other OPEC producers have refused US and other consuming nations' efforts to increase oil output beyond moderate increases, despite the fact that oil consumption is recovering from the COVID-19 epidemic and Russian supply is declining after its invasion of Ukraine.

OPEC+, which reduced output after oil prices fell to record lows as a result of the epidemic, decided on Thursday to continue with its current strategy to reverse the cuts with moderate increases for another month.

Although NOPEC is meant to safeguard American consumers and companies from artificially inflated gasoline prices, several experts warn that its implementation might have some catastrophic unexpected effects.

Saudi Arabia threatened in 2019 to sell oil in currencies other than the dollar if Washington passed NOPEC, a move that would erode the dollar's status as the world's primary reserve currency, erode Washington's influence in global trade, and erode Washington's ability to impose sanctions on nation states.

Senator John Cornyn, a Republican from Texas, the leading oil-producing state in the United States, opposed the plan, claiming that it would force OPEC to limit oil exports to the United States.

"If we really want to address the issue of rising gasoline prices, we should increase domestic production of oil and gas," Cornyn added.

The American Petroleum Institute, the largest oil and gas lobbying organization in the United States, also opposes the plan. API said in a letter to the committee's leaders that NOPEC "creates enormous potential harm to US diplomatic, military, and commercial interests while likely having a little effect on the market concerns that motivated the legislation."

According to some experts, NOPEC might eventually affect US energy firms by pressuring Saudi Arabia and other OPEC members to flood global markets with oil, since they produce it at a lower cost than American companies.