Relations between the United States and the Oil Producing and Exporting Cartels (OPEC) are hitting new lows as new US legislation intends to open OPEC members and partners to antitrust lawsuits for orchestrating supply cuts that raise global crude prices.
The US Senate Committee has already passed a new bipartisan No Oil Producing and Exporting Cartels (NOPEC) bill with a 17-4 majority, marking a significant step forward in the decades-old proposal that was never pushed to that limit.
The new bill is seen as the latest episode in the US struggle to put brakes on volatile oil prices following the eruption of the Russia-Ukraine conflict. The US efforts to compensate for any expected cuts in Russian production included ramping up national production, releasing strategic stocks, and pressuring OPEC countries to increase their production.
However, the organisation has resisted the calls from the US to approve a dramatic increase in output and only agreed to stick to plans for a gradual oil output increase, amounting to 432,000 barrels per day in June.
The alliance has even fallen short of its quotas by 2.59 million barrels per day in April, according to the latest OPEC+ survey by S&P Global Commodity Insights.
The bill, which, according to its supporters, aims to protect US consumers and businesses from engineered spikes in energy prices, would now need to be passed by the full Senate and the House, before being signed into law by the president.
Although several previous attempts to pass this law have failed, today’s growing voter frustration over high gasoline and diesel prices in the US has increased the chances that it could be passed.
But several analysts warn of dire consequences that will not only jeopardise the energy sector, but many other sectors as well, while top OPEC ministers hit back at the legislation, saying such efforts would bring greater chaos to energy markets and could see oil prices shoot up by as much as 300 per cent.
The Biden administration itself has expressed concern over what it described as the “unintended consequences of the legislation” as the war in Ukraine is still fuelling volatility in energy markets.
One of these serious concerns over the bill is the possibility that OPEC members could issue similar measures against US firms. Such measures could haunt US agriculture and military industries.
Another strong warning came from the US oil companies, which not only fear retaliatory action against US companies abroad, but are also afraid that if the legislation ultimately leads to overproduction by OPEC and bring prices down, US energy companies will have difficulty boosting output.
OPEC members have the cheapest oil to produce. Low prices will get the US high-cost shale oil out of the market.
Amid Nopec tension, some voices argued that it is a big mistake to blame OPEC for the price crisis. These voices include for example the Republican senator Ted Cruz, who blamed the Biden administration policies for the crisis, while the United Arab Emirates energy minister Suhail al-Mazrouei indicated that extreme volatility in oil markets is not an issue of supply and demand, “it’s because some don’t want to buy certain crudes and it takes time for traders to move from one market to another.”
Speaking in the same context, Saudi Energy Minister Prince Abdulaziz bin Salman said it was “mind-boggling” that people were focusing on high oil prices and not on the rising cost of gasoline or diesel, for instance.
The minister said, “it is such a lazy thing to try and find someone to throw the blame at”.
