Some US Congress members believe that OPEC has kept oil prices high in its own interest by monopolizing the oil production
OPEC or NOPEC:This is the Question
Ever since having taken office as president of the United States, Donald Trump has made surprising decisions by reversing previously-adopted treaties and pulling the US out of international pacts. He has been pursuing a new approach vis-à-vis nations. This trend is not limited to political, military and security affairs. The Trump administration has also targeted the economy. He has already put into trouble the US’s trade deals with China, the European Union, American and Asian nations. A controversial issue is the oil market and forcing changes into traditional equations and existing structures like the Organization of the Petroleum Exporting Countries (OPEC). Trump has openly opposed OPEC decisions and sought to persuade some member states to work in favor of US interests by overruling any consensus within the oil producer group. Legislation that aims to prevent the 14-nation OPEC from coordinating production — and influencing oil prices — is once again advancing on Capitol Hill. The House Judiciary Committee recently passed the No Oil Producing and Exporting Cartels Act, commonly known as NOPEC, clearing the bill for a vote before the full House of Representatives. US Vs. OPECSome US Congress members believe that OPEC has kept oil prices high in its own interest by monopolizing the oil production. In their view, the high oil prices are putting a strain on American gasoline consumers. The bill was first introduced in 2000, and Congress has revived it several times since then — most recently in the last Congress, where it stalled after getting approval of House Judiciary Committee. The full House and Senate passed NOPEC legislation in 2007. The House passed it again in 2008, when oil prices hit an all-time high at nearly $150 a barrel. However, the bill languished under threat of veto from former President George W. Bush. Former President Barack Obama also opposed NOPEC, but analysts have speculated the measure could find support in the Trump White House. The bill would essentially make it illegal for foreign nations to work together to limit fossil fuel supplies and set prices. They would authorize the U.S. Justice Department to sue oil producers for antitrust violations by stripping foreign actors of sovereign immunity protections. President Donald Trump repeatedly blamed OPEC on Twitter last year for driving up the price of oil. At the UN General Assembly in September, he told world leaders the group was ripping them off. Still, there are signs the fresh NOPEC push in Congress has unnerved OPEC. The group reportedly advised member countries against mentioning oil prices when discussing production policy. In January, The Wall Street Journal reported the group
is considering undertaking a campaign to influence U.S. perception of OPEC. It comes as some members of OPEC are trying to extend the group’s two-year alliance with Russia and nine other producers. In 2016, the so-called OPEC+ coalition reached a historic agreement to cut production in order to drain a global crude glut and end a punishing oil price downturn.OPEC FunctionAny anti-OPEC action for reducing fuel prices in the US may win Trump and other US politicians popularity, but the fact is that oil prices hikes are partly due to the US policies, as well. For instance, the Trump administration’s move to impose oil sanctions on Iran and Venezuela has undermined supply and increased prices. Furthermore, gasoline prices in the US, like every other oil importing nation, are related to fuel taxation. Therefore, the high gas prices in the US are an immediate outcome of the taxation system and the pro-sanctions foreign policy of this country. Accusing OPEC of manipulating oil prices is just a politically-motivated electoral campaigning attempt.The fact is that OPEC quota system, which was established in 1982 following a price crash, brought stability into international markets. Although oil production without any legal constraints and quota system may initially reduce prices, it would give rise to destructive consequences, too. For instance, when oil prices are low, firms are not persuaded to envisage long-term investment. Therefore, after some time, oil production will fall. Furthermore, low oil prices would not make oil recovery economical in such places as Alaska, the Gulf of Mexico, the North Sea and western Canada. In short, low oil prices would spell an end to recovery from many oil fields and reservoirs. The important point is that when oil prices are low the US – as the largest holder of shale oil reserves – would suffer losses the most, because low prices would not compensate for shale oil extraction and the US will have to stop investing in oil recovery projects. OPEC, as a body which has managed to strike a balance to oil supply and demand, has never acted against the interests of consumers. Even on the contrary, it has prevented any drop in supply and strain on consumers like the US. NOPEC to Cause US HarmOPEC is a must for market stability and secure energy supply. The attempt made by some Congress members in the US to vote for the NOPEC legislation would destabilize the oil market, because on one hand OPEC has prevented oil price slump to attract more investment into the petroleum industry and increase supply across the globe, and on the other, it has created an extra production capacity in order to keep the prices from a sharp jump in case of supply disruptions. Therefore, in case NOPEC is signed into law, oil producing nations would no longer be motivated to control their oil supply surplus. Over recent years, OPEC’s extra production capacity has been a safety valve to prevent a supply glut in the market and keep oil prices from growing sharply.An adoption of the NOPEC bill would pit Washington against OPEC members while it may harm the US’s ties with some of its longtime allies like Saudi Arabia. Despite their dependence on the US, the Saudis believe that undermining or dissolving OPEC would be an action against their main source of income. Saudi Arabia will by no means favor such bills as NOPEC. Furthermore, NOPEC would affect Russia-OPEC ties, thereby pitting Russia against the US in the energy sector.Last but not least, approval and implementation of NOPEC would not only target the economy and harm energy supply, it would also affect the US’s political ties with many nations. Therefore, NOPEC is an unreasonable and illogical bill whose approval by the Trump administration is likely