The cohesion in the Organisation of Petroleum Exporting Countries (OPEC) that has helped maintain stability in the international crude oil market may be broken if the proposal by some US lawmakers to establish a “No Oil Producing and Exporting Cartels (NOPEC) law is approved.
The lawmakers behind the proposal have already put together a bill they say would break the anti-competition resolve of OPEC member countries aimed at controlling the supply of crude oil to the market to stabilise price.
Since OPEC was founded in Baghdad, Iraq, in September 1960 by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela, the group has always adopted strategies to keep them in control of the pricing mechanism to stabilise the crude oil market.
Since April 2020, in the wake of the global economic uncertainty that impacted the oil market, the 13-member countries group, including Qatar, Indonesia, Libya, the United Arab Emirates, Algeria, Nigeria, Ecuador, Gabon, Angola, Equatorial Guinea and Congo, has been working with its Non-OPEC members led by Russia to implement an oil production cut deal.
The pact signed under a Declaration of Cooperation agreement was aimed at boosting crude oil price and stability in the market.
The output cut deal aimed at curtailing excess supply capacity in the market was recently extended for the umpteenth time till the end of 2023, to continue to keep the price of crude oil at the international market within an acceptable band, currently at an average of $82 per barrel as at Thursday, March 9, 2023.
The success of the deal being spearheaded by the OPEC and Non-OPEC Joint Ministerial Monitoring Committee (JMMC) has been a source of serious concern to most advanced economies, including the US, which have come under pressure to find alternative source of energy in the wake of supply constraints as a result of sanctions against Russia.
The proposal by the US lawmakers to reintroduce the NOPEC law is seen by experts as one of ways the Joe Biden administration plans to stop OPEC from sustaining the Declaration of Cooperation that allows them to maintain crude oil output ceiling.
Reuters said the NOPEC Bill would be introduced by a group of bipartisan lawmakers led by Senators Chuck Grassley, a Republican, and Amy Klobuchar, a Democrat, and others members of the Judiciary Committee who see the existence of OPEC as promoting anti-competition among the world oil producers.
Reuters said if the proposed legislation is passed by the committee, both Chambers of the US Congress and assented to by President Joe Biden, NOPEC would revise the U.S. antitrust law to revoke the sovereign immunity protecting OPEC+ members and their national oil companies from lawsuits over deals to protect the market’s pricing mechanism.
The attempt by the US and other advanced economies to establish the NOPEC law has been a source for serious concern to OPEC for over two decades, as one of the founding fathers of the group, Saudi Arabia, has always mobilise other key members, to lobby against it each time the proponents come up with the idea.
But it appears with the advanced economies under serious pressure to find alternative sources of supply of crude oil to make up for the loss of opportunities from Russia in the aftermath of the Russia-Ukraine conflict, the stakes are really high against the group.
“The oil cartel and its member countries need to know that we are committed to stopping their anti-competitive behaviour,” Grassley is quoted to have said of the US lawmakers move recently.
Also, Klobuchar was reported to have said that the current antitrust law has made the Justice Department powerless to stop the 13 largest oil-producing countries from manipulating prices and driving up costs.
