Prospects Brighten for Perennial ‘Nopec’ Bill

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Geopolitics: Opec's Fraying Cohesion

A decades-old initiative aimed at enabling Washington to sue foreign state-owned firms for curtailing oil output or setting prices may have stronger prospects for passage in the current pricing and geopolitical landscape.

The so-called “Nopec" Act— an acronym for "No Oil-Producing and Exporting Cartels" — would sever sovereign immunity shields from state-backed oil companies, opening the possibility of US lawsuits for collusion.

The bipartisan bill, which tends to resurface whenever oil prices become painful for consumers, is slated for a vote on Thursday in the Senate Judiciary Committee. The Nopec legislation saw interest from lawmakers in 2019 before stalling out in both chambers of Congress, but reemerged last year and was advanced by a House committee.

However, those that have watched previous Nopec efforts fall short suggest the current backdrop of $100-plus oil prices and Opec-plus member Russia’s invasion of Ukraine could lend some momentum to the bill this time around.

A recent analysis by Clearview Energy Partners suggested that the bill likely passes a committee vote, and that “after nearly 22 years of failed attempts, 2022 could be the year that the bill passes into law.”

The analysis points to Opec-plus holding the line on supply amid a sustained price spike and flags the possibility that lawmakers could tack the bill onto a supplemental Ukraine funding bill to avoid a separate floor vote.

Strong anti-Russian sentiment is resonant on Capitol Hill, and the possibility that the bill’s proponents could frame the legislation as addressing Russia’s role in Opec-plus may amplify its political appeal beyond its potential impact on high crude prices.

Saudi Sway

“There are different political winds” than when the bill has previously wended its way through Congress, but the “same current underneath,” said Harry First, a New York University law professor who co-authored an antitrust analysis of the Nopec bill in 2020. Saudi Arabia still wields substantial political clout in Washington, although its sway has waned since Joe Biden became president.

Seth Bloom, a congressional aide to the bill's original sponsor in 2000, noted that resistance to the bill has historically stemmed in part from State Department concerns that it could interfere with foreign relations. However, US President Joe Biden has taken a strong antitrust bent that could offset those concerns, Bloom pointed out.

It’s not clear whether the White House would support the bill. Kirsten Fontenrose, nonresident senior fellow with the Atlantic Council’s Scowcroft Middle East Security Initiative, said that the bill accelerating in Congress potentially gives Biden some leverage in talks with Saudi Arabia at a time when the US has been looking for help when it comes to oil markets and regional issues, but Riyadh has been dissatisfied with the relationship.

The frequent complaint in Riyadh is that the White House has repeatedly asked for increased oil output to lower prices without offering much in return. But offering to push back against Nopec in Congress in exchange for a White House priority, “that’s something they could give.”

Upstream Opposition

US oil producers continue to oppose the bill.

“This could clearly have a negative impact on US operations and investments in those countries across all sectors, which, given the current geopolitical environment, could create significant unintended consequences,” American Petroleum Institute President Mike Sommers said in a letter last week to US Sens. Dick Durbin (D-Illinois) and Chuck Grassley (R-Iowa).

Grassley is a key sponsor of the legislation, along with Sens. Amy Klobuchar (D-Minnesota), Patrick Leahy (D-Vermont) and Mike Lee (R-Utah).

Policy and Regulation, Oil Prices, Opec-Plus Supply , Opec/Opec-Plus
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