White House concerned over Nopec bill: Update

  • Market: Crude oil
  • 05/05/22

Adds White House reaction, updates throughout

The latest US congressional effort to apply US anti-trust laws against Opec will have unintended consequences complicating President Joe Biden's efforts to stabilize global oil markets, the White House said today.

The Senate Judiciary Committee voted 17:4 to approve the No Oil Producing and Exporting Cartels (Nopec) Act, which would enable US prosecutors to sue foreign entities in US courts for anti-competitive behavior in oil markets — the latest iteration of anti-Opec legislation that has been making rounds since the 2000s. The House of Representatives' judiciary panel voted last year to back a similar bill.

The White House does not oppose the bill outright, but "the potential implications and unintended consequences of this legislation require further study and deliberation," it said. "We are taking a look at it and certainly have some concerns about what the potential implications could be."

The bill's advancement through the Senate panel is a rare issue that placed the White House in agreement with concerns expressed by industry group the American Petroleum Institute. The legislation threatens "serious, unintended consequences" by giving Opec members an opportunity to reciprocate against US companies, the group's president, Mike Sommers, said. The growth in US oil production has mitigated concerns about foreign producers' improper influence on markets, Sommers said, arguing that passing the bill would jeopardize US producers' ability to sustain growing production.

The US debate over the bill would further weaken Washington's already strained relationship with Mideast Gulf Opec members, an Opec delegate said.

The US and other key oil consumers have been repeatedly frustrated by Opec+ hesitation to further accelerate the group's production increases. One Opec+ official noted that this moderate pace of increases is the product of the group's inability to implement higher hikes, rather than of diplomatic unwillingness. Under-investment in oil and gas ventures has left some Opec+ members with dwindling spare capacity, largely focused in Saudi Arabia and the UAE. Argus estimates that Opec+ production recorded a monthly decline in March for the first time in 13 months, to now sit 1.48mn b/d under the coalition's quota.

The Opec+ delegate questioned whether the coordinated actions of IEA member states, including the US, to draw down their strategic oil reserves in a bid to lower prices at the pump was a "cartel-like" behavior. In the latest such measure, the US and other IEA participants have pledged to draw a combined 240mn bl over the next six months. The Opec+ group is set to bring back about 180mn bl over May-September, another Opec+ source said.

"Our objective is ensuring the supply and the oil markets meets the demand, and Opec has a role to play there," the White House said. The administration plans to analyze potential implications given "the dynamic moment in the global energy markets brought about by (Russian president Vladimir) Putin's invasion of Ukraine," the White House said.

Opec finds unusual defenders

The committee's discussion of the bill today featured an unexpected deviation from long standing bipartisan support for such legislation in Congress, as Republican senators opposed to Biden's energy policy worked to deflect blame for high oil prices from the foreign producers' alliance.

"It is important for the American people to understand that the cause of the high prices at the gas pump right now is not Opec," senator Ted Cruz (R-Texas) said, blaming the Democrats for "desperately trying to find a bad guy" to assign blame for high oil prices. The reason that Opec has market power is because "President Biden has declared war on oil and gas, and he does not want America to produce its oil and gas," senator John Kennedy (R-Louisiana) said.

Senator Chuck Grassley (R-Iowa), whose advocacy of ethanol has frequently pitted him against fellow Republicans representing oil states, retorted that giving the White House tools to influence foreign producers is a positive development regardless of what energy policy the administration pursues.

"The fact is that we do not have free competition in global oil markets," said senator Amy Klobuchar (D-Minnessota), who co-sponsored the bill with Grassley.


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