Bills
| 3.23.22

NOPEC: Should the OPEC Cartel be Subject to U.S. Anti-Trust Law For Fixing Oil Prices? (H.R. 948)

Do you support or oppose this bill?

What is H.R. 948?

(Updated May 31, 2020)

This bill — the NOPEC Act — would subject the Organization of the Petroleum Exporting Countries (OPEC) cartel subject to U.S. anti-trust law by removing a sovereign immunity shield that was created by judicial precedent and therefore protects OPEC nations. Specifically, it’d be a violation of anti-trust law for any organization’s members to cooperate to: 1) limit the production or distribution of oil, natural gas, or any other petroleum product; 2) set or maintain the price of oil, natural gas, or any other petroleum product; or 3) take any other action to restrain the trade of oil, natural gas, or any other petroleum product.

OPEC is considered to be a cartel, which is a group of suppliers or buyers of a commodity or product (in this case petroleum suppliers) who coordinate their actions to increase their collective profits and decrease competition within the market they participate in. OPEC was created in 1960, it currently has 15 member nations which collectively provided 44% of global oil production and possessed 73% of the world's oil reserves as of 2016.

By removing the sovereign immunity shield from OPEC, whose members are foreign countries, the Dept. of Justice would be able to bring actions against OPEC members in federal court.

The bill’s full title is the No Oil Producing and Exporting Cartels (NOPEC) Act of 2018.

Argument in favor

For too long, the OPEC cartel has fixed oil prices to maximize their profits and decrease competition while avoiding accountability for anti-competitive behavior. This bipartisan bill ends that by ensuring the federal government can enforce anti-trust law against OPEC.

Argument opposed

It won’t do any good for the U.S. to go after OPEC in federal court, as those countries will try to manipulate petroleum markets in other ways. The administration could tell the Dept. of Justice to not pursue an anti-trust action against OPEC for diplomatic or economic reasons.

Impact

OPEC or other petroleum market cartels; federal courts; and the DOJ.

Cost of H.R. 948

The CBO estimates that enacting this bill would have an insignificant impact on the deficit

Additional Info

In-Depth: Sponsoring Rep. Steve Chabot (R-OH) reintroduced this bill from the 115th Congress to subject OPEC to U.S. anti-trust law:

“As we have seen time and again, when oil prices are low, international oil cartels ramp up their price-gouging efforts in order to manipulate the global crude oil market.It’s high time that we do more to fight the artificial production controls that continue to keep the price of crude oil and gasoline arbitrarily high in the United States. The legislation we approved today would significantly help to fight price-gouging by subjecting OPEC nations to antitrust laws, and prohibiting them from unilaterally withholding supply with the intent of raising prices or creating a shortage.”

Original cosponsor Rep. David Cicilline (D-RI) added:

“Since 1960, OPEC has manipulated the supply and price of oil with total impunity under American law. They constantly drive the cost of oil higher, meaning working people in our country end up paying more for gas for their car or heat for their homes. It’s time for this to end. I’m proud to introduce the NOPEC Act to give Americans relief from the high costs OPEC has forced on them for more than half a century.”

Congressional support for this bill increased in fall 2018, due to crude prices approaching a four-year high due to production limits set by OPEC and President Trump publicly blaming OPEC for high pump prices in the U.S. As president, Trump has consistently bashed OPEC on Twitter, blaming it for artificially keeping oil prices high: 

"Looks like OPEC is at it again. With record amounts of Oil all over the place, including the fully loaded ships at sea, Oilprices are artificially Very High! No good and will not be accepted!"

Before running for president, Trump was an advocate for passing the NOPEC bill. In his 2011 book , he wrote about the problem of high oil prices: 

"Currently, bringing a lawsuit against OPEC is difficult. The way to fix this is to make sure that Congress passes and the president signs the 'No Oil Producing and Exporting Cartels Act."

BP, the American Petroleum Institute (API), and the Chamber of Commerce both oppose this bill, as they argue that the U.S.' role as the world's biggest oil and gas producer has increased its leverage against OPEC and provided protection against price volatility. In a letter to the Chairmen and Ranking Members of the House and Senate Judiciary Committees, API CEO Mike Sommers wrote: 

"Cartels for any commodity are harmful to consumer interests, and this effort to restrict the market impact of OPEC nations is well-intended. However, the legislation threatens serious, unintended consequences for theU.S. natural gas and oil industry and its continued success in eroding OPEC’s negative market impacts. U.S.crude oil production has reached record highs this year, helping to put downward pressure on gasoline prices for U.S. consumers and substantially diminishing the influence of OPEC nations – two of the bills’ primary goals. In several ways, NOPEC legislation jeopardizes U.S. companies’ ability to sustain progress in achieving these objectives. These legislative efforts represent a political act aimed at removing a sovereign nation’s litigation immunity from certain US laws and opens the opportunity for reciprocal or even additional action on the part of those impacted countries. This would clearly have a negative impact on our country’s presence in those countries at all levels, which, given their existing geopolitical importance and capacity for US investment, could create significant unintended consequences. This potential cost is even more concerning to our members for two other reasons. First, the current Sherman Antitrust Act already covers the commercial activities of nations even for activity that takes place abroad. There is no need to create international concerns for situations already addressed. Second, the apparent focus on the legislation – improper influence on energy markets – has been mitigated significantly in recent years.The success of America’s oil and natural gas industry coupled with continued integrations with our NAFTA partners has significantly increased the energy security and self-sufficiency of the United States. This energy renaissance has made America much less susceptible to efforts that may be undertaken by foreign organizations."

Lucian Pugliesi, president of the Energy Policy Research Foundation, Inc. (EPRINC), adds that this bill could have unintended consequences for U.S. energy companies:

"The problem with the legislation is that it is extremely broad and divorced from the real world. It comes with a long array of unintended economic and legal consequences. The  language in the bill is so broad that it could be used to sue non-OPEC states and U.S. energy companies that do business with OPEC members... Retaliation would be commonplace as OPEC and aligned nations could take U.S. companies into local courts. Most importantly, it eliminates sovereign immunity a long standing common law and statutory defense which protects U.S. assets from capricious behavior abroad. Open capital markets and freedom from uncertain and capricious behavior by the U.S. government is one of the hall marks that makes domestic oil and gas reserves a magnate for foreign capital. It would be a tragedy if in an attempt to address real or presumed threats from OPEC, we undermined our domestic energy security."

Hossein Kazempour Ardebili, Iran's OPEC representative, says this bill is an attempt to "blackmail" the group, and adds that using antitrust law is "nonsense legally speaking, and we in OPEC are fighting it." On February 12, 2019 OPEC Secretary General Mohammad Barkindo said: 

"OPEC is neither a cartel nor in the business of fixing oil prices. It would be a misjudgment to accuse us of such. OPEC is an open, transparent organization focused on assisting the oil markets to remain in balance on a sustainable basis, which is a fundamental requirement of investors. The international oil industry needs market stability to plan and invest in a predictable manner in order to guarantee future supplies."

Michael Cohen, an economist at Barclays Capital, says it's unclear whether this bill will pass, but the odds look better this year than in the past:

"It’s unclear if this will pass the House or the Senate. There is an alignment of interests that’s never been there before between the Democrats that see this as being an anti-Saudi measure and by President Trump himself who has been anti-OPEC for a long time. Somehow the stars have aligned."

However, Cohen adds, this bill's passage isn't a good thing from the markets' perspective:

"Overall, we believe that if such legislation moved forward, it would threaten the sustainability of the OPEC and OPEC+ grouping, add more volatility to the market, and make the perceived floor under prices even more fragile.” 

Last Congress, this legislation passed the House Judiciary Committee on a voice vote and has the support of six bipartisan cosponsors, including four Republicans and two Democrats. A 2007 version of this bill passed both the House and Senate by wide margins, but was vetoed in the White House. Both Presidents George W. Bush and Barack Obama threatened to use their vetos to prevent this bill's passage in previous Congresses. However, Jason Bordoff, director of the Center on Global Energy Policy at Columbia University and a former Obama administration oil official, believes that Trump may break with his predecessors.


Media:

Summary by Eric Revell

(Photo Credit: AlexLMX / iStock)