Creating new perspectives since 2009

Why NOPEC is not a good idea to tackle the global energy crisis

October 13, 2022 at 8:00 am

Representatives of OPEC member countries attend a press conference after the 45th Joint Ministerial Monitoring Committee in Vienna, Austria, on October 5, 2022 [VLADIMIR SIMICEK/AFP via Getty Images]

You have probably heard of OPEC: Oil Producing and Exporting Countries. Nowadays, the news headlines are much about OPEC+, which includes OPEC members plus Azerbaijan, Bahrain, Brunei, Kazakhstan, Malaysia, Mexico, Oman, Russia, South Sudan and Sudan. These countries are not OPEC members but they are oil exporting countries playing an important role in the international energy markets. Their role has increased significantly after the Russian invasion of Ukraine last February.

Last week, OPEC+ decided to cut oil production by 2 million barrels/day, and this decision has angered many in the United States.

Attempts are being pursued in the US Congress to curtail both OPEC and OPEC+, in order to reduce prices for US consumers. This is the declared idea behind NOPEC: No Oil Producing and Exporting Cartel (NOPEC) Bill. But the other important aim is to punish Russia by denying it billions of dollars through forcing OPEC+ to increase production.

The Chairman of the United States Senate Foreign Relations Committee, Bob Menendez, on 11 October, called for a freeze on relations with Saudi Arabia. Why Saudi Arabia? Mr. Menendez believes Riyadh is helping Moscow by agreeing to cut production.  Saudi Arabia, like many countries, did not impose sanctions on Russia, upsetting the US and Western countries which implemented wide packages of sanctions against Russia.

Higher oil prices are bad news for the Biden Administration as the US heads towards the mid-term elections next month. US Democrats want to protect their fragile congressional majority, hoping to win more seats in the mid-term vote, and higher oil prices do not help. However, the idea of targeting OPEC is not new and attempts to end its near world monopoly on oil production has always been cumbersome for the US and the West, in general.

OPINION: Many Libyans are enraged by HMS Albion’s visit to their country

What Senator Menendez, and many other US politicians, want goes deeper than forcing Riyadh, the second world oil producer, to increase production. Saudis stand accused of underwriting Russia’s war in Ukraine, as low oil productions could lead to higher oil prices. The idea is to curtail OPEC and OPEC + in the long term.

Many in the US believe the best way to do this is by using the US’ anti-trust federal laws to prosecute other nations under the theme of being unfair competitors in the oil market. Under such laws, the first of which was passed in 1890, countries like Saudi Arabia could be held accountable under US jurisdiction, simply for making independent decisions on how to manage their own economies, natural resources and how much oil they produce.

Past attempts to curtail OPEC in many different ways have, so far, failed but weakened the group. Many in the US itself, including the American Petroleum Institute, fear that such measures could back fire. They argue that targeting OPEC+ could expose US oil companies to vengeful sanctions around the world and may well destabilise the oil market for a long time, with serious consequences for oil thirsty economies like the US.

However, US laws do not have any power outside US jurisdiction. Furthermore, the use of such laws outside US jurisdiction, for example against other sovereign nations, means the US is not only overstepping its international obligations, but also meddling in other countries’ affairs by forcing them to adhere to US laws, when the opposite is not true: i.e., the US is not forced to adhere to other nations’ laws when it comes to trade. It is not even respecting international laws and norms in certain circumstances, like the invasion of Iraq in 2003.

Politically, the idea of having the US jurisdiction as a reference in international affairs, including in trade, is manipulative, negative and simply another US hegemonic approach – something that will upset China and Russia.

OPINION: Israel exploits the Algerian-Moroccan rift to push them further apart

Disputes in international commodity markets, including oil, must be settled through internationally recognised organisations, based on international law. The World Trade Organisation, for example, is the best place to settle such disagreements, globally, when bilateral talks fail to produce the desired outcome. In this instance, the US is not doing that. Instead, it wants to impose its will on other sovereign nations simply because they did not go along with its policies.

The US and the West, in general, always refer to OPEC as a “curtail”, just like they refer to drug dealers and other organised crime gangs, with the aim of discrediting the legitimate organisation. Energy analysts, whenever an oil crisis appears, cannot help recall OPEC’s role in the 1970s, when Saudi Arabia and others stopped selling oil to countries supporting Israel because of its occupation of Arab lands in Palestine and beyond. No one in the West wants any of that to happen again. But this time, the target is Russia because of its war on Ukraine.

Even President Joe Biden’s visit to Saudi Arabia, last summer, falls into this policy category. The only other aim of that visit, described as “historic” in US media, was to help Israel in what appeared to be a failed public relations campaign, to make Israel more acceptable in the region despite its apartheid practices against the Palestinians.

READ: Saudi says OPEC+ decision purely economic

If NOPEC goes ahead, it is likely to harm US oil and gas producers, exposing them to retaliatory actions by other countries where they have interests. The US, as a country, would be accused of manipulating the energy international market by releasing more than 165 million barrels of oil, in order to help bring down prices for the American consumers. While the oil released from the US strategic reserve helps US consumers, its effect is not, necessarily, global when it comes to lowering prices.

It has been a kind of unspoken US energy policy to weaken, if not destroy OPEC, which has been dominating the world energy market as the group sets policies of production. OPEC+ would not have existed without OPEC.

It is not yet clear if the NOPEC Bill will become law any time soon. Furthermore, even if that happens, it is unlikely to have any immediate effect on OPEC+ or OPEC, for that matter.

Unclear, also, is how helpful NOPEC could be to the global energy market, particularly in the European Union. The block is yet to develop its own energy policy to contain the energy crisis triggered by the war in Ukraine. While it took a series of steps to free itself from dependency on Russian oil and gas, this remains an impromptu reaction rather than well thought long term policy.

What is certain is that OPEC and OPEC+ will be around for a long time to come, even if a little weaker.

READ: US Senator calls on Washington to ‘freeze’ cooperation with Saudi Arabia following OPEC+ agreement

The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Middle East Monitor.