The decision by the Organization of the Petroleum Exporting Countries and its Russia-led allies to cut oil production has Washington looking at ways to hit back.
U.S. lawmakers are pushing bills that aim to break up the cartel; charge it in front of the World Trade Organization; or even seize assets its members own in the U.S.
The White House, after Wednesday’s action by OPEC+ to slash oil production by 2 million barrels daily, threatened to join Congress in efforts to loosen the cartel’s power over energy prices—a move which analysts say could lead the U.S. to curb overseas exports.
It marks a potential end to what had been several years of a fragile detente between OPEC and the U.S., the world’s largest oil consumer.
As its own oil production grew over the past decade, the U.S. emerged as a major exporter, changing the dynamics of the U.S.-OPEC relationship as both sides had a stake in stable global oil markets.
Behind-the-scenes talks between U.S. officials and OPEC leaders began in the late years of the Obama administration and early years of the Trump administration, and later turned into direct deal-making to stabilize oil markets at the height of the pandemic.
But those rosy relations have darkened over the past year as consumer energy prices have hit record highs and OPEC-ally Russia invaded Ukraine.
Concerned over high energy prices in the U.S., President Biden visited OPEC’s largest oil producer, Saudi Arabia, this summer in an effort to improve relations soured by factors including the killing of journalist Jamal Khashoggi in 2018.
But Mr. Biden didn’t secure a pledge by the Saudis to boost oil production. Saudi officials have consistently said the kingdom would do what is needed to balance the market, and said Wednesday’s decision was based on projections showing oil demand waning with economic growth.
White House officials said they would respond to Wednesday’s action with more releases from the government’s strategic reserves, among other potential options. They also pledged to “consult with Congress on additional tools and authorities to reduce OPEC’s control over energy prices.”
Sen. Edward J. Markey (D., Mass.) said he is going to reintroduce a bill called the OPEC Accountability Act. It requires the president to approach OPEC member countries and their allies for talks about ending their cooperation on oil production and prices.
If those talks don’t weaken production cuts, the U.S. Trade Representative would be required to initiate dispute proceedings at the WTO.
Three House Democrats led by Rep. Tom Malinowski (D., N.J.,) said Wednesday they were proposing legislation to mandate the removal of U.S. troops and defense systems from Saudi Arabia and the United Arab Emirates. The OPEC decision to cut output will boost oil prices in a way that helps Russia wage war in Ukraine, and the U.S. shouldn’t give military help to countries willing to help Moscow like that, the group said.
“Saudi Arabia and the UAE’s drastic cut in oil production, despite President Biden’s overtures to both countries in recent months, is a hostile act against the United States and a clear signal that they have chosen to side with Russia in its war against Ukraine,” Mr. Malinowski and Reps. Sean Casten of Illinois and Susan Wild of Pennsylvania said. “This decision is a turning point in our relationship with our Gulf partners.”
Looming even larger in Congress, analysts and lobbyists said, is pending legislation called the No Oil Producing and Exporting Cartels Act, or NOPEC. Debated now for more than two decades but never passed, the bill would allow the Justice Department to sue members of OPEC for antitrust violations.
Current U.S. law prohibits sovereign governments from being sued without their consent. But under NOPEC, the Justice Department could sue OPEC members—national governments that own and control oil companies—for price fixing in U.S. courts under the Sherman Act, and then seize foreign-owned property in the U.S. to pay for any resulting damages.
Using those powers would be a dramatic intervention, analysts at the research firm ClearView Energy Partners LLC wrote in a note to clients. Showing signs of any intention to use those powers “could lead OPEC+ to reconsider and potentially abandon its ‘market balancing’ role, provoking a dramatic selloff and the exhaustion of global spare capacity,” they wrote.
The legislation has a long history of bipartisan support, getting a vote from Mr. Biden himself when he was a senator and voted for an early version of the Energy Independence and Security Act of 2007. But Congress later cut the NOPEC language from that legislation—and it also died in other stand-alone efforts in the face of White House opposition and fears it could damage relations with Saudi Arabia.
Analysts and lobbyists say that dynamic might have changed with Riyadh and Washington at odds over the kingdom’s relationship with Moscow and alleged human-rights violations, including the killing of Mr. Khashoggi, which U.S. intelligence agencies concluded was carried out under the orders of Saudi Crown Prince Mohammed bin Salman.
The bill has been reintroduced in the current and last sessions with co-sponsorship from Sens. Chuck Grassley (R., Iowa), Amy Klobuchar (D., Minn.), Patrick Leahy (D., Vt.) and Mike Lee (R., Utah), all members of the Senate Judiciary Committee.
OPEC leaders take the bill seriously and are outraged by threats to pass it, analysts and lobbyists said. Their countries sent 1.5 million barrels a day of crude and oil products to the U.S. this summer—helping to fill the gap from a ban on Russian imports—and they might all reconsider selling to the U.S. if NOPEC becomes law, said Matthew Reed, an analyst at Washington-based consulting firm Foreign Reports Inc.
Saudi leaders “feel they’re doing the U.S. oil industry a favor by trying to put a floor under prices when a global recession may be just around the corner,” Mr. Reed said. “NOPEC represents another unpredictable market intervention when the oil trade is already distorted by so many overlapping sanctions and embargoes.”
Domestic politics might push Mr. Biden to consider it anyway, analysts and lobbyists said. Mr. Biden has been under pressure to deal with inflation, and while pump prices dropped steadily throughout the summer, a recent rebound complicates his efforts weeks before midterm elections that will determine control of Congress.
U.S. officials said a ban on exports of diesel and gasoline is possible, but not imminent. Analysts said the administration is likely to wait to see whether prices shoot up again before taking drastic action.
Industry lobbyists said that for weeks, they have been receiving mixed messages from administration leaders about whether they might revive plans for such bans first considered a year ago.
As recently as two weeks ago, administration officials, including Mr. Biden’s senior adviser on energy security, Amos Hochstein, were assuring industry executives that they didn’t want to implement such a ban, according to one of the people familiar and another person with knowledge of the exchanges.
But in a meeting Friday between White House officials and oil executives, the oil-industry trade groups American Petroleum Institute and American Fuel and Petrochemical Manufacturers said the administration refused to rule out limitations on exports.
Mr. Hochstein and other White House officials told executives that whether the administration deploys an export ban depends partly on whether oil-and-gas companies supply products quickly enough to refill storage tanks that are low in several parts of the country, according to people familiar with the matter, and that turmoil in the energy markets was forcing them to consider a range of responses.
This story has been published from a wire agency feed without modifications to the text