Energy Tribune
In mid-May, the U.S. House of Representatives passed a bill that will allow the U.S. government to sue itself. Of course, that’s not how the bill’s backers sold the measure, known as the “No Oil Producing and Exporting Cartels Act of 2007,” or NOPEC for short. Instead, the bill, sponsored by John Conyers, a Michigan Democrat, and Steve Chabot, an Ohio Republican, claim the measure “subjects OPEC and other oil cartels to federal antitrust scrutiny by eliminating the sovereign immunity they receive under current law.”
They also claim NOPEC will make it illegal for “countries to artificially set high prices and limit the production of oil, natural gas, or any other petroleum product.”
Much of the support for NOPEC comes from the growing anti-Arab sentiment in America. While fighting racism is no easy task, the astounding fact is that Congress has no recollection of how good OPEC has been to the U.S., nor does it understand that America’s occupation of Iraq – one of OPEC’s charter members – makes the U.S. a de facto member of the very cartel that Congress wants to vilify.
Yes, I said OPEC has been good to the U.S. Further, OPEC’s pricing strength has been very good for the U.S. oil business.
OPEC was the first major international player to accept America’s occupation of Iraq. In September 2003, during an OPEC meeting in Vienna, the member countries, after a bit of squabbling, agreed to allow the Iraqi oil minister to attend. If OPEC had really wanted to hurt the U.S., it could have prevented the Iraqis from attending. Or it could have demanded that the United Nations recognize Iraq first. Doing so would have denied the interim Iraqi government much-needed legitimacy. It wasn’t until early June 2004 – after months of intense lobbying by the Bush Administration – that the U.N. Security Council finally approved a resolution recognizing the interim Iraqi government.
OPEC has played a key role in stabilizing oil prices. While Iran and Venezuela have sought higher prices, Saudi Arabia, the most important OPEC member, has tried to stabilize oil prices at levels that are good for both consumers and producers. This was made clear by Saudi oil minister Ali al-Naimi in 2006, when he said that the “foundation of sustainable energy security is a price low enough to avoid harming consumers, yet high enough to assure adequate return on investment for producers.”
OPEC now plays the same role that the Texas Railroad Commission did from the 1930s to 1973. The commission brought stability to a chaotic global oil market by setting production limits (back then, they were called “allowables”) on Texas oil companies. The agency allowed companies to produce enough oil to meet current demand, and not a barrel more. Before the commission took control of the market, oil producers were constantly whipsawed by prices, going back and forth between boom and bust, overproduction and underproduction, as prices rose and fell in chaotic patterns.
Today, without OPEC’s regulation of production, the global oil market would be subject to those same chaotic price swings. And any sustained price drop would be devastating for America’s domestic oil producers who, due to their generally high operating costs, need higher prices to be profitable. Thus, while American politicos blather on about “energy independence” they are ignoring the need for stable prices, which allow domestic producers to continue investing in new drilling.
Finally, the fact that Congress wants to sue OPEC ignores the fact that Iraq is an American colony. With NOPEC, Congress wants to give the U.S. Attorney General the authority to, in essence, sue the same Iraqi government being propped up by the 150,000 U.S. troops who are now occupying Iraq. Perhaps the attorney general should just sue the U.S. military for colluding with the Iraqis.
Amidst the political posturing by Congress, the truth is obvious: if OPEC didn’t exist, the U.S., or someone else, would have to invent it. The oil market needs a regulatory body with enough cohesion to prevent oversupply. Nevertheless, the House passed NOPEC by a margin of 345 to 72 and the Senate Judiciary Committee has approved a similar bill. A vote by the full Senate is expected soon.
