How the US Congress could defang OPEC and keep gas prices low in one stroke

  • In Business
  • 2022-11-30 09:00:00Z
  • By Quartz

Americans would get a better deal on heating oil and gasoline this winter, were it not for petroleum-rich nations colluding to keep prices high. Price-fixing scheme are usually illegal. However, the US can't sue the Organization of the Petroleum Exporting Countries (OPEC). But what if it could?

The idea was first put forth back in 2000, when antitrust lawyer Seth Bloom wrote the NOPEC Act. It stands for No Oil Producing and Exporting Cartels. The law would explicitly permit the US government to pursue price-fixing claims against oil-producing countries.

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OPEC is an oil cartel of 13 countries, like Saudi Arabia and Venezuela, which represent 60% of the petroleum traded internationally. Ten more countries joined forces with OPEC to create OPEC+ in 2016.

The US has collected billions of dollars in fines against other international price-fixing cartels, but it's been helpless against OPEC because of the Foreign Sovereign Immunities Act and act-of-state doctrine, which US courts have largely decided protects OPEC from similar claims.

Earlier this year, when OPEC cut production by 2 million barrels a day, which would drive prices higher, the White House said it would explore "additional tools and authorities" with Congress. Some speculated that could include resurrecting NOPEC.

NOPEC has come up in Congress several times. The closest it got to passing was in 2007, when different versions of the bill passed the House and the Senate but were never reconciled. More recently, the House and Senate judiciary committees approved the bill, and it's now on the Senate's legislative calendar.

What would happen if Congress passed NOPEC? We talked to Bloom in a QZ&A to find out. The conversation is edited for length and clarity.

QZ: How much would the Justice Department suing OPEC countries do? Do we have an idea of how effective it would be?

Seth Bloom: The hope or goal would be that one would never have to file a lawsuit. The fact that our government would have the ability to file a lawsuit would deter nations in OPEC, I think. The idea of NOPEC is that this would be a weapon we could use.

If, in fact, the government sued, it would be like how the government sues nations for acts of state-sponsored terrorism and can recover assets held in the United States. And these countries all have a lot of assets in the United States.

If we waive this sovereign immunity, would every time OPEC makes a unilateral decision be considered a violation of antitrust law?

If the OPEC member nations got together and agreed to limit the supply of oil, that's a price fixing scheme, sure.

Now, there's something called prosecutorial discretion. Maybe you don't do it every time, but when it's serious, you could decide to do it.

By the way, on this point of sovereign immunity and acts-of-state doctrine, there already is a commercial exception in the statute. Countries don't have sovereign immunity for their commercial activities.

So if a nation contracts with a private company and doesn't pay the private company, that company can still sue the nation. The problem is the courts have not applied it that way with respect to oil cartels, but it's really not that radical when there already is a commercial activity exception to sovereign immunity.

Why do we have immunity for sovereign nations in the first place?

It's based on the idea that we shouldn't be telling sovereign nations what to do. The idea of comity amongst nations has been a decades-long tradition.

Nations with respect to their own political issues shouldn't be sued by another nation. That's just been a long-standing tradition of our law and most countries' laws.

But as I've said, we've always had exceptions to it for commercial activity. What could be more commercial than selling oil for profit?

What are the chances of NOPEC passes through Congress?

What OPEC and OPEC+ has just done certainly raised the chances of it coming before Congress.

Is there time for Congress to consider this before they go out? I think it's possible but unclear.

Next year they would have to reintroduce it which I'm sure they would and it then has to pass through judiciary committees, both House and Senate, and then they could bring it up on the floor. That process would take several months.

Right now it's ready for action, both in the House and Senate. So they could do it very quickly, if they wanted to do it.

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