Washington, DC—Enactment of the proposed No Oil Producing and Cartels Act (NOPEC) “is an important part of a worldwide effort to stop international cartels that harm [U.S.] consumers and reduce economic welfare,” according to independent research conducted on behalf of Securing America’s Future Energy (SAFE).
A white paper from Harry First, the Charles L. Denison Professor of Law at New York University and Darren Bush, the Leonard B. Rosenberg Professor of Law at the University of Houston Law Center, concludes that while NOPEC “does not completely cure all the legal problems,” the “relatively moderate” legislation would “remove substantial roadblocks” that OPEC has used to evade U.S. antitrust law.
Robbie Diamond, President and CEO of SAFE, said, “The argument in favor of NOPEC is simple: The Justice Department should be allowed to treat OPEC in the same way it treats all other cartels. Empowering DOJ to use the Sherman Act to protect U.S. consumers from OPEC’s collusive activities in oil markets – where the most strategically important commodity is traded – will enhance U.S. economic and energy security.”
If enacted, the legislation will amend the Sherman Act to remove the sovereign immunity and Act of State doctrine defenses OPEC and its members currently use to evade U.S. antitrust litigation. The white paper notes that a diverse array of organizations have attempted to sue OPEC in the past, including private industry/small businesses, labor unions, and other policy advocacy groups, and that these defenses have been used successfully by OPEC member nations’ lawyers.
Moreover, the paper suggests that concerns of retaliatory risk are misplaced: “While asymmetric retaliation outside the competition law system is certainly possible, there is no history of such retaliation against U.S. antitrust enforcement.”
The First-Bush white paper concludes that by limiting authorization to sue to the federal government, NOPEC does not expose OPEC “to the full panoply of enforcement that the antitrust laws ordinarily provide.” In contrast, if they could overcome the sovereign immunity or Act of State defenses, private lawsuits would open OPEC and its members up to “the possibility of large damages judgements, or even default judgements.”
Accounting for almost 82 percent of the world’s proven reserves, OPEC dominates the global oil market despite recent U.S. output reaching new highs. Since the cartel’s inception, OPEC has sought to leverage its advantages in reserves and cheap production to influence prices—seen most recently in 2014, when the cartel maintained high production levels to drive prices down in response to U.S. shale. The price of oil fell from $110 per barrel in June 2014 to just $26 in February 2016—leading approximately 200 U.S. oil and gas companies into bankruptcy between 2015 and 2016, taking approximately 200,000 jobs with them.
Oil price volatility represents a significant and persistent issue for U.S. energy and economic security. The United States is the world’s largest oil consumer, taking up one-fifth of daily global supply. Additionally, the U.S. transport system is 92 percent dependent on petroleum, with no alternatives available at scale. As a result, when prices spike, U.S. consumers have nowhere to turn. In addition, oil is a uniquely globally-priced commodity, meaning that a supply disruption anywhere affects prices everywhere—regardless of how much the United States produces.
About Securing America’s Future Energy
Securing America’s Future Energy (SAFE) is an action-oriented, nonpartisan organization that aims to reduce America’s dependence on oil. Near-total dependence on petroleum in the transportation sector undermines the nation’s economic and national security, and constrains U.S. foreign policy. To combat these threats, SAFE advocates for expanded domestic production of U.S. oil and gas resources, continued improvements in vehicle fuel efficiency, and transportation sector innovations including electric vehicles, natural gas trucks, and autonomous vehicles. In 2006, SAFE joined with General P.X. Kelley (Ret.), 28th Commandant of the U.S. Marine Corps, and Frederick W. Smith, Chairman, President, and CEO of FedEx Corporation, to form the Energy Security Leadership Council (ESLC), a group of business and former military leaders committed to reducing the United States’ dependence on oil. Today, the ESLC is co-chaired by Frederick W. Smith and General James T. Conway (Ret), 34th Commandant of the U.S. Marine Corps.
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