Why ‘NOPEC’ keeps appearing as America’s answer to OPEC

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For nearly two decades, lawmakers in Washington pushed legislation that would rein in the Organization of the Petroleum Exporting Countries. Faced with an almost certain presidential veto, the proposal never crossed the finish line. Now the legislation is getting a makeover amid soaring gas and oil prices.

1. What would the legislation do?

The bill – dubbed the “No Oil Producing and Exporting Cartels Act” or “NOPEC” – would empower the US Department of Justice to bring antitrust lawsuits against OPEC for attempting to control oil production or affect crude prices. He would do so by amending the Sherman Antitrust Act of 1890, the law used more than a century ago to break up John Rockefeller’s oil empire. Even if the Justice Department were never to act on its prosecutorial power, the mere existence of this option could be enough to force the cartel to change its behavior.

2. Does it have a chance of becoming law?

A recent vote by the Senate Judiciary Committee clears the way for a full Senate review, but it’s unclear when or if Majority Leader Chuck Schumer will introduce the measure. The Biden administration has expressed concern about the unintended consequences of the legislation as the war in Ukraine fuels volatility in energy markets. Versions of the bill were approved by the House of Representatives and the Senate in 2007, but the idea did not advance under the threat of a veto from President George W. Bush. Former President Donald Trump backed the idea of ​​NOPEC before becoming president, and OPEC was a frequent target of his on Twitter, but during his four-year tenure the legislation never came under scrutiny. a vote in either chamber.

The American Petroleum Institute and the U.S. Chamber of Commerce have come out strongly against the bill, fearing retaliatory action against U.S. companies overseas if it becomes law. US shale producers also benefit from OPEC’s discipline to support prices when they fall too low without any risk.

4. What would be the possible repercussions on the oil market?

Makan Delrahim, Trump’s antitrust chief, said during a December 2018 Senate hearing that NOPEC “could very well lower the price ultimately to the consumer.” But in the short term, the switch could potentially push prices higher, especially if fears of retaliation escalate.

More stories like this are available at bloomberg.com

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