Western capitals have been bemused with the oil producing cartel led by Saudi Arabia over the price monopoly enjoyed by the OPEC members. The resentment in the US increased when Saudi Arabia and the OPEC members refused to increase oil output in the aftermath of the Ukraine war, despite a personal request by President Joe Biden. Then, adding insult to injury, OPEC moved in with Russia to cut oil output by 2 million barrels a day, further tormenting the US.
With the US mid-term elections over, and the Democrats springing back from the edge of a loss to retain the control of the Senate, the long-entrenched idea of passing an ant-cartel legislation that hurts OPEC+ has regained momentum.
The basic idea behind the anti-OPEC move is to create a system that allows for more control of the global oil market so that price surges can be limited. Along with this, activists also want to push for the electrification of transport on a global scale and reduce the dependence on fossil fuels.
Apart from the US, the European Union has also been open to the idea of limiting the influence of the OPEC+ cartel. Earlier this year, Italian Prime Minister Mario Draghi said large oil buyers should together to float a platform that 'stands up to OPEC+.
What is NOPEC?
A bill that seeks to remove the anti-trust waiver enjoyed by state oil monopolies like Saudi Aramco and Russia's Rosneft has been doing the rounds for the last several years. The bill is titled No Oil Producing and Exporting Cartels (NOPEC) Act. Though the move has had prominent backers, it never went beyond discussion stages at various US parliamentary committees.
However, a few weeks ago, the U.S. Senate Judiciary Committee moved the Senate, marking a big milestone. The bill, if passed, will allow the US to sue OPEC for antitrust behavior and market manipulation.
Though the idea has been around for some time, the recent Saudi move to ally with Russia to cut oil output drastically infuriated the US. Several Democrats in Congress pressured the Biden administration to review ties with Saudi Arabia and enact the anti-OPEC bill.
How OPEC Nations will be Affected
If the bill is enacted the US can technically start an anti-trust move against big OPEC oil companies, such as the Saudi Aramco. Such a move was unthinkable earlier, when the US and Saudi Arabia were seen as unbreakable allies. Riyadh's refusal to heed to Biden's pleas for oil output increase resulted in the fraying of the ties, while OPEC's decision to cut output further exacerbated the situation.
If the bill is passed, the US could punish OPEC+ members in several ways. Washington can impose fines, charge import tariffs, and even roll out sanctions against the monopolies. Another way to hurt the large oil producers from Middle East, Latin America and Russia would be to bar cut off their flagship oil companies from public financial markets.
Who Consumers will be Affected
Whether it's a consumers' alliance suggested by Draghi or the NOPEC Act in the works in the US, a move to limit price fluctuations will directly benefit the oil consumers. Right now the producers have an upper hand and the consumers are left to the vagaries of price fluctuations. However, there is also the other argument that any effort to re-draw supply chains will unsettle the markets and cause a price surge in turn.
Will it Work?
Analysts point out that while the move is fuelled by idealism, the practical aspects do not look very good. For one thing, some large national oil companies like the Rosneft are already heavily sanctioned. Secondly, the behemoths like Aramco and Rosneft do not depend on external financing, and therefore, will not suffer severe damage if they cut off from financial markets.