How Trump's View on OPEC May Fuel U.S. Antitrust Push

(Bloomberg) -- For almost two decades, lawmakers in Washington have been pushing legislation that would rein in the Organization of Petroleum Exporting Countries. Facing a near-certain presidential veto, the proposal has never crossed the finish line. Things might be different now, given President Donald Trump’s frequent tirades against OPEC for keeping oil prices too high -- the latest coming Monday -- as well as the backlash against Saudi Arabia following the murder of journalist Jamal Khashoggi.

1. What would the legislation do?

The bill -- dubbed the "No Oil Producing and Exporting Cartels Act," or "NOPEC" -- would empower the U.S. Department of Justice to file an antitrust lawsuit against OPEC for trying to control oil production or to affect crude prices. It would do this by amending the Sherman Antitrust Act of 1890, the law used more than a century ago to break up the oil empire of John Rockefeller. Even if the Justice Department were never to act on its power to sue, the mere existence of this option might be enough to force the cartel to change its behavior.

2. Does this proposal have a chance of becoming law?

It’s come close in the past. Versions of the bill were approved by the House of Representatives in 2007 in a 345-72 vote, then by the Senate by 70-23, but the idea got no further under a veto threat by President George W. Bush. Trump, though, supported the NOPEC idea before becoming president, and OPEC has been a frequent target of his on Twitter.

3. What are oil prices doing?

The market has rallied almost 24% this year on the back of OPEC production cuts, sanctions against Venezuela and optimism over trade talks between the U.S. and China. That’s what prompted Trump’s latest twitter intervention, which sent prices down as much as 2.7 percent. Prices had previously been falling since reaching the highest in almost four years in October.

4. Where do things stand?

The NOPEC bill was approved by the House Judiciary Committee on Feb. 7 and is awaiting a potential vote by the full House. A similar bill has been introduced in the Senate. The White House has yet to set out its stance on the proposed bill. The Justice Department said at the end of last year that the administration “continues to study” the legislation.

5. Who opposes NOPEC?

Both 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 abroad if it becomes law. Given the U.S. is now the biggest oil and natural gas producer in the world, they also argue that OPEC has lost some of its sway over world markets. U.S. shale producers also benefit from OPEC’s discipline in bolstering prices when they fall too low without any of the risk.

6. What would be the possible repercussions for the oil market?

Makan Delrahim, Trump’s antitrust chief, told a Senate hearing in December that NOPEC “could very well lower the price ultimately to the consumer.” But in the short-term, passage could potentially boost prices, especially if fears of retaliatory action escalated.

The Reference Shelf

• An interview with the bill’s chief House sponsor.
• OPEC’s antitrust liability risks at highest point in two decades: BI
• QuickTake explainers on OPEC’s powers and Trump’s interest in the U.S. Strategic Petroleum Reserve.
• OPEC helped force the U.S. to become a more potent oil exporter, Julian Lee wrote in Bloomberg Opinion.

To contact the reporter on this story: Stephen Cunningham in Washington at scunningha10@bloomberg.net

To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net, Laurence Arnold

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