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NOPEC act may push many states to exit OPEC deal

Oil&Gas Materials 13 February 2019 12:08 (UTC +04:00)

Baku, Azerbaijan, Feb.13

By Leman Zeynalova – Trend:

Passage of the US NOPEC act, and successful enforcement, could end OPEC's ability to enact production cuts and target setting, effectively ending the organization’s relevance and impact, Trend reports citing Fitch Solutions Macro Research (a unit of Fitch Group).

Many of the sovereign states may choose to exit the Declaration of Cooperation in order to avoid fallout, Fitch Solutions believes.

"The end of OPEC interventions could lead to an oversupplied market, lowering fuels costs, although wild fluctuations in prices would be more likely as balance of supply and demand is a key function of OPEC's mandate," reads a report from Fitch Solutions.

The report says that eliminating sovereign immunity could open the floodgates on all manner of policy and commercial actions taken by the US. "In addition, retaliatory measures by OPEC+ members could include embargoes, asset seizures and other escalating destabilizing measures."

"The NOPEC bill will now be put on the House Calendar. It will then be decided by House leaders whether it will come up for debate and vote. The timing of the next steps is unclear. Various versions of the bill have come to this stage of the legislative process previously and have even passed both the House and Senate, though neither were enacted into law. The US president’s office has yet to state position on the bill though it is expected to be supported."

The US oil industry and oil producing states would fiercely oppose the bill as OPEC serves as key buffer to low oil prices and any removal of price influence would hurt profits, according to Fitch Solutions.

"We at Fitch Solutions expect the bill to fail if brought to a vote as the oil interests and commercial impacts would be significant and the potential second order effects on US politics, policy and commerce too great for legislators to risk for the benefit of lower consumer fuel prices," reads the report.

US House of Representatives committee approved a bill on Feb.7 that would open up the Organization of the Petroleum Exporting Countries to antitrust lawsuits.

The House Judiciary Committee passed the bipartisan bill, known as the No Oil Producing and Exporting Cartels Act, or NOPEC, on a voice vote.

The legislation would change U.S. antitrust law to revoke the sovereign immunity that has long protected OPEC members from U.S. lawsuits. It allows the U.S. attorney general to sue the oil producers group or any of its members on grounds of collusion.

Versions of the bill have appeared without success in Congress for the past 20 years. The committee also approved a version of the bill last year by voice vote, but it never reached the full House for a vote.

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Follow the author on Twitter: @Lyaman_Zeyn

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