Why ‘NOPEC’ Keeps Arising as a U.S. Answer to OPEC
(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. Now, the legislation is getting a new look amid surging gasoline 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 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 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. Former President Donald Trump supported the NOPEC idea before becoming president, and OPEC was a frequent target of his on Twitter, but during his four-year term the legislation was never brought to the floor for a vote in either chamber.
3. 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. U.S. shale producers also benefit from OPEC’s discipline in bolstering prices when they fall too low without any of the risk.
4. What would be the possible repercussions for the oil market?
Makan Delrahim, Trump’s antitrust chief, told a Senate hearing in December 2018 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.
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