Will the NOPEC bill be enacted at all?

The issue of NOPEC is back in the limelight as Reuters reported that sources familiar with Saudi Arabian energy policy said that the Kingdom is threatening to sell its oil in currencies other than dollar if Washington passes a bill exposing Organisation of the Petroleum Exporting Countries (Opec) members to the United States antitrust lawsuits. Saudi Arabia denied any intention to sell its oil in currencies other than dollar, while some experts warn against the implications of a collapsed petrodollar system originated in the early 1970s.

NOPEC stands for No Oil Producing and Exporting Cartels Act. The NOPEC Act was initially introduced in 2000 as a Congressional bill and reintroduced in 2007 and 2008, but never enacted. Then-senators Barack Obama and Hilary Clinton both voted “yes” on NOPEC, which is ironic, since Obama threatened to use his veto power as US president preventing it from becoming a law.

NOPEC was designed to remove the sovereign immunity shield and to allow the international oil cartel, Opec and its national oil companies to be sued under the US antitrust law for anti-competitive attempts to limit/monopolise the world’s supply of petroleum and the consequent impact on oil prices. The US eyes crackdown on Opec, especially after the Algiers Accord (2016) and Vienna Convention (2018), and pressuring other oil producing countries worldwide not to impact global oil prices.

Prior to the agreement to cut oil output in the end of 2016, many believed that Opec no longer played a core role in the oil market nor did it have an impact on markets like it used to be.

However, this historical agreement restored confidence that this didn’t spell the end of Opec nor that of petroleum era. In fact, this has fuelled the belief that the future of Opec is strong and bright, especially since its members managed to overcome many hardships and crises in a rational manner.

The Trump administration’s agenda in this regard is packed. It includes cheaper global oil prices to achieve some goals pertaining to his policies, such as to curb inflation in the US economy, offset budget deficit, expand Europe’s options away from Russia’s domination of the energy supply market, and enhance feasibility and effectiveness of the US sanctions on Iran and maintain the status of dollar as top international trade currency. This compels US to directly control energy pricing and through supporting systems and governments.

There is a big difference of opinion among US legislators towards this act since it was first introduced. However, if enacted, many Opec members will have other options, including ditching the dollar, especially this was discussed among Opec members and a group of senior officials from those countries.

Moreover, other non-Opec countries are willing to exchange the dollar in such trades. NOPEC is a hot topic again, along with the factor of unexpected US policies; especially that Trump’s decisions are unpredictable. As the world’s largest oil producer, Saudi has already opposed this act since George Bush’s time. In addition, the Kingdom has major investments in the US economy, and this act may lead to loss of those investments, not only in the energy sector, but in many others. That is the reason why the Congress is not inclined to pass this act.

Controversy surrounds this act since 2000, and no one knows how committed oil-producing countries will be to this bill in case it was enacted and the countermeasures to be taken in this case. The possibility of NOPEC to be enacted is very slim.

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