American energy could be collateral damage in attempt to punish OPEC

American energy could be collateral damage in attempt to punish OPEC
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For the second time in less than a calendar year, a bill is advancing through Congress that would strip other countries of some of their sovereign immunity. The No Oil Producing and Exporting Cartels Act, or NOPEC, is again making its way through Congress, and it would make oil-producing nations beholden to the anti-trust lawsuits of the United States. On the surface, this legislation seems like it would promote American energy security by helping to ensure a more competitive oil market. In fact, NOPEC legislation would do the exact opposite, endangering not only our energy security and domestic economy but also American companies operating in foreign countries.

Suing state actors for participation in the Organization of Petroleum Exporting Countries (OPEC) would not help America’s energy situation — and it would promote instability in the oil market. It would also be detrimental to America’s international business interests to stripping nations of sovereign immunity in anti-trust cases. The best solution for the U.S. to combat OPEC interference is to fully unleash the free market at home. 

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If NOPEC were to become law, the Justice Department could, for the first time, sue the governments of any or all of the 14 member nations that comprise the oil cartel and the 10 additional countries that have joined OPEC in a production cut agreement over the last two years. This includes Venezuela, Iran and Russia, but also countries such as Mexico and Angola. The logistics of bringing another government to an American court seem prohibitive, but that is not enough to derail Congress.

Politically, the NOPEC Act seems like a slam-dunk. After all, no one likes OPEC or wants to protect Iran, Russia or Saudi Arabia. Many of the countries in OPEC and many of its partner countries are distrusted in the US for past oil price manipulation. They are also denounced for human rights violations, oppressive authoritarianism or support of terrorism. Some are disliked for all of the above. However, NOPEC should not become law just because it can receive superficial popular support. 

The United States is now the largest oil producer in the world, producing 12.1 million barrels of oil per day. The domestic oil industry helped keep the economy afloat during the recovery from the Great Recession, and currently 10.3 million American jobs are supported by the oil and gas industries. However, when oil prices fell to $27 per barrel in 2016, Americans with these jobs suffered. Prices fell at that time because OPEC stopped functioning like a cartel when its member states engaged in production free-for-alls.

The U.S. rightly derides the OPEC cartel and its production quotas because they violate the American sense of fairness and competition, but right now the production cuts are actually helping the U.S. oil industry and protecting American jobs. The current agreement between OPEC and the 10 non-member participants eliminates only a small volume of oil from the market, but it helps stabilize prices.

Moreover, if we eliminate sovereign immunity for countries manipulating the oil market, these countries would do retaliate against American interests within their borders — in energy and in other fields. America’s largest energy firms have interests overseas, often in OPEC and partner countries. They could suffer retaliation including appropriation, fines or higher taxes. 

The best way to counteract the cartel’s influence is not to strip these countries and their national oil companies of their sovereign immunity to anti-trust lawsuits. It is for America to rely on its own free market to innovate and unlock energy opportunities at home while protecting American enterprises abroad.

Ellen R. Wald, Ph.D., is a senior fellow at the Atlantic Council's Global Energy Center as well as the president of Transversal Consulting, a global energy and geopolitics consultancy. She is the author of the newly released book, “Saudi, Inc.,” a history of Aramco and how the Saudi royal family controls this multi-trillion dollar enterprise.