Congress’ push to hobble the global oil cartel with ‘NOPEC’ may or may not get Trump’s backing
Democrats and Republicans don’t agree on much these days, but a bipartisan group of lawmakers is finding common cause in legislation that would make life very difficult for the oil producer group OPEC.
Legislation that aims to prevent the 14-nation OPEC from coordinating production — and influencing oil prices — is once again advancing on Capitol Hill. On Friday, at least one senior Trump administration official expressed support for the legislation, signaling a potential chip in White House opposition to the measure, which has held firm for the last two decades.
On Thursday, the House Judiciary Committee 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. The same day, Democrats Patrick Leahy and Amy Klobuchar and Republicans Chuck Grassley and Mike Lee introduced NOPEC legislation in the Senate.
The bills 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.
Leahy first introduced a similar bill in 2000, and Congress has revived it several times since then — most recently in the last Congress, where it stalled after getting House Judiciary Committee approval. The full House and Senate passed NOPEC legislation in 2007. The House passed it again in 2008, the same year 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.
Asked about the NOPEC bill on Friday, a senior Trump administration official told Reuters, “The United States is firmly committed to open, fair, and competitive markets for global energy trade. We do not support market-distorting behavior, including cartels.”
The White House did not immediately return a request for comment. It is not uncommon for a Trump official to express a view, only to be undercut by another administration member. NOPEC would likely face opposition in some corners of the administration because it would threaten Trump’s close relationship with top OPEC producer Saudi Arabia.
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. Last month, 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.
On Thursday, Barclays said passage of NOPEC legislation could see the oil market return to a period of instability.
“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,” Michael Cohen, head of commodities research at Barclays, said in a research note.
The OPEC+ cuts that began in 2017 helped oil prices gradually recover to three-year highs around $70 a barrel by the start of last year. The rebound accelerated last spring as Trump prepared to restore sanctions on Iran, prompting OPEC+ to reverse course in June and hike output. But in December, the group agreed to once again cut output as oil prices crashed.
Despite his public criticisms, Trump has found OPEC useful at times. The president publicly lobbied the group to use its control over about a third of the world’s oil supply to drive down oil prices. He thanked Saudi Arabia after the kingdom surged output by nearly 1 million barrels a day between June and November.
But Trump has not tweeted about OPEC since the Saudi leadership in Riyadh defied him and pushed through new output cuts in December.
Meanwhile, the Saudis made clear at the time they felt ambushed by Trump’s decision to allow several of Iran’s biggest customers to continue importing oil from the Islamic republic.
That is a view shared by some oil executives.
“The prospect of Iranian sanctions coming back and Iranian oil coming off the market really started to push prices up, and of course when we had the waivers issued by the U.S. government at the same time as OPEC began to produce more, we had excess supply on the market and you saw prices come off,” Chevron Chairman and CEO Michael Wirth told CNBC’s “Squawk Box” on Friday.
While U.S. drillers compete with state oil firms controlled by OPEC countries, they also partner with them on projects and have come to see OPEC as a stabilizing force in the market. They also benefit when OPEC’s interventions lift oil prices.