The United States Senate in late June passed a bill that would allow the Justice Department to sue the Organization of Petroleum Exporting Countries (OPEC) for price manipulation and high oil prices, but President George W. Bush has threatened to veto the bill, warning that OPEC members could retaliate by tightening the flow of oil into the US.
The bill, dubbed NOPEC or the “No Oil Producing and Exporting Cartels Act of 2007” would revoke the sovereign immunity OPEC members enjoy from being sued in US courts.
OPEC President Mohammed al-Hamli called the move by US lawmakers a dangerous step and added that decisions taken by OPEC were non-binding and that the organization will fight these attempts.
“It’s a really dangerous step. We will defend ourselves against these attacks,” Hamli told reporters at an oil conference in Turkey in June.
Latest official figures show that Americans are currently paying an average of $3.21 a gallon at the gas pump as oil prices continue to reach record highs. Prior to the Iraq war, Americans paid an average of $1.00 a gallon and blaming OPEC appears to score some points with the public.
“We don’t have to stand by and watch OPEC dictate the price of our gas,” Senator John Conyers, a Democrat from Michigan said. “We can do something about … this anti-competitive, anti-consumer behavior, and we are.”
The pressure’s on
The anti-OPEC bill was sponsored by Senators Herb Kohl, a Democrat of Wisconsin and Arlen Specter, a Republican of Pennsylvania. The House voted 345-72 to pass the bill.
“Price fixing by cartels is the worst violation of antitrust law and the principles of free competition,” Kohl told Executive. “If OPEC nations were private companies, their actions would be plainly illegal under antitrust law,” he added.
He thinks NOPEC would give the US government an important tool in responding to OPEC actions.
Although the White House has threatened to veto the measure, the bill may become law as both the Senate and the House have enough votes to override the veto. “The bill passed both Houses by more than the two-thirds needed to override a veto, 345-72 in the House, and 70-23 in the Senate,” Kohl said. But observers note that even if it became law, the Bush administration’s Justice Department would be the entity that would have to initiate any lawsuit.
But not all Americans support the action against OPEC. Local observers believe the problem with current oil prices is the combined increase in global demand and shortages of refinery capacity in the US. They say that congress is aiming at the wrong target. “It is the US refiners — who have made record profits — who should be called on the carpet and who every year about this time make their annual financial killing,” Robert Prince in Washington said.
“The arrogance this legislation conveys is unbelievable and completely irresponsible. As an American, I’m ashamed,” a US citizen who wished to remain anonymous told Executive. “Oil prices will continue to rise because demand has started to outstrip supply. This is the most basic rule of economics and our leaders don’t seem to appreciate it.”
Republican Senator Pete Domenici of New Mexico warned that the plan would hurt US consumers more than it would OPEC. “OPEC producers could just decide not to sell oil to us any longer,” he told reporters. “They would suffer the loss of some profits but our entire economy could come to a grinding halt.”
Although the official reaction from OPEC to NOPEC was perfunctory, Hamli said OPEC had successfully fought off two prior attempts by US lawmakers against OPEC and will do so again.
But supporters of the bill don’t believe that OPEC will react by cutting or reducing oil supplies to the US. “We would be surprised if OPEC member nations would want to stop selling oil to one of their best customers,” Kohl said.
“We would hope OPEC would respond to this law by ceasing the practice of setting mandatory production quotas designed to drive up the price of crude oil, rather than take the extreme step of cutting off oil supplies,” he added.
OPEC says the high prices are due to geopolitical tensions and refinery bottlenecks in the US rather than any shortage of crude supply. And most analysts do not foresee a decline in prices in the near future. On the contrary, what they predict is an extreme jump in prices by 2009 and 2010.
In late June, the New York-based Bloomberg News quoted Jeffrey Currie, a London commodity analyst at the world’s biggest securities firm, saying that $95 crude is likely in 2007 unless OPEC increases production, and declining inventories are raising the chances for $100 oil. Jeff Rubin at CIBC World Markets predicts $100 a barrel as soon as 2008.
