Released May 06, 2022 | SUGAR LAND
en
Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--U.S. lawmakers took up a bill Thursday that would make it possible to sue the Organization of the Petroleum Exporting Countries (OPEC) on antitrust grounds, a bill that opponents said would only heighten the geopolitical risk premium supporting the price of oil.
OPEC+, a group that includes the core members of the production group and its non-member state allies, such as Russia, decided Thursday to put another 432,000 barrels per day (BBL/d) of oil on the market come June. The decision was widely expected, given the group's tendencies so far this year to rubber-stamp policy.
Thursday's meeting to consider the June allotment took less than 15 minutes. The allotment, meanwhile, is far less than what many expect the economy needs given the supply-side pressures that resulted from the war in Ukraine.
"It was noted that continuing oil market fundamentals and the consensus on the outlook pointed to a balanced market," an OPEC statement read. "It further noted the continuing effects of geopolitical factors and issues related to the ongoing pandemic."
The market does not look balanced. Geopolitical factors could result in the loss of as much as 3 million BBL/d of Russian crude oil, according to the International Energy Agency.
In the earnings report for the first quarter, Ben van Beurden, the CEO at Anglo-Dutch major Shell plc (NYSE:SHEL) (London, England), said it was indeed geopolitical risk that was contributing to uncertainty in the commodities market.
"The war in Ukraine is first and foremost a human tragedy, but it has also caused significant disruption to global energy markets and has shown that secure, reliable and affordable energy simply cannot be taken for granted," he said. "The impacts of this uncertainty and the higher cost that comes with it are being felt far and wide."
That "far-and-wide" sentiment, meanwhile, was used by supporters of a bill under review in the Senate Committee on the Judiciary. Tacitly to support domestic energy security, the No Oil Producing and Exporting Cartels Act (NOPEC) would open the door for parties to sue OPEC on antitrust grounds.
The bill is not new. Previous versions of the bill were put forward in 2018 and 2019. None of those efforts made it to the full Senate. But Sen. Chuck Grassley, a Republican representing Iowa, said recent volatility in the price of oil confirms his long-standing concerns that energy security is on par with national and economic security.
"The U.S. economy should not be held hostage to geopolitical affairs dominated by the Organization of Petroleum Exporting Countries and autocratic regimes, such as China, Russia, Iran and Venezuela," he said.
Indeed, with the OPEC+ umbrella protecting the likes of Russia, Kazakhstan, Mexico and Azerbaijan -- all major crude oil producers in their own right -- price movements are seemingly controlled by a select few market players.
Global issues, meanwhile, have domestic consequences. Even though the U.S., for example, imported very little crude oil from Russia, broad-based market factors impact prices at home. After the European Union proposal on Russian oil materialized on Wednesday, the price for U.S. crude oil shot up 5.7%. The national average retail price for a gallon of regular unleaded gasoline, meanwhile, is $4.25, some 45% higher than year-ago levels. As global crude oil prices go, so too goes the price of domestic gasoline.
The U.S. Chamber of Commerce, however, suggested NOPEC legislation would only make matters worse. In a letter to Grassley, the group said NOPEC would open the door to global bickering and only exacerbate geopolitical tensions.
Although the bill is meant to limit trade restraints, the Chamber of Commerce said it would create a tit-for-tat precedent that would expose U.S. interests to foreign legal actions.
"Under reciprocal legal regimes, the United States and its agents throughout the world could be tried before foreign courts -- perhaps including the military -- for any activity that the foreign state wishes to make an offense," it stated.
If those concerns have merit, the bill's passage would only amplify the politicization of OPEC. Mohammed bin Salman, the de facto ruler of Saudi Arabia, has refused to take phone calls from U.S. President Joe Biden.
And it's almost assured that Russia is using its seat at OPEC+ for political gain.
The liberal world order cuts both ways. By herding multiple parties with multiple interests together, rogue behavior can in theory be moderated. But it can also create an us-versus-them mentality for which, given the realignment of the global world order underway in 2022, there is no easy relief.
Industrial Info Resources (IIR) is the world's leading provider of market intelligence across the upstream, midstream and downstream energy markets and all other major industrial markets. IIR's Global Market Intelligence Platform (GMI) supports our end-users across their core businesses, and helps them connect trends across multiple markets with access to real, qualified and validated project opportunities. Follow IIR on: LinkedIn.
OPEC+, a group that includes the core members of the production group and its non-member state allies, such as Russia, decided Thursday to put another 432,000 barrels per day (BBL/d) of oil on the market come June. The decision was widely expected, given the group's tendencies so far this year to rubber-stamp policy.
Thursday's meeting to consider the June allotment took less than 15 minutes. The allotment, meanwhile, is far less than what many expect the economy needs given the supply-side pressures that resulted from the war in Ukraine.
"It was noted that continuing oil market fundamentals and the consensus on the outlook pointed to a balanced market," an OPEC statement read. "It further noted the continuing effects of geopolitical factors and issues related to the ongoing pandemic."
The market does not look balanced. Geopolitical factors could result in the loss of as much as 3 million BBL/d of Russian crude oil, according to the International Energy Agency.
In the earnings report for the first quarter, Ben van Beurden, the CEO at Anglo-Dutch major Shell plc (NYSE:SHEL) (London, England), said it was indeed geopolitical risk that was contributing to uncertainty in the commodities market.
"The war in Ukraine is first and foremost a human tragedy, but it has also caused significant disruption to global energy markets and has shown that secure, reliable and affordable energy simply cannot be taken for granted," he said. "The impacts of this uncertainty and the higher cost that comes with it are being felt far and wide."
That "far-and-wide" sentiment, meanwhile, was used by supporters of a bill under review in the Senate Committee on the Judiciary. Tacitly to support domestic energy security, the No Oil Producing and Exporting Cartels Act (NOPEC) would open the door for parties to sue OPEC on antitrust grounds.
The bill is not new. Previous versions of the bill were put forward in 2018 and 2019. None of those efforts made it to the full Senate. But Sen. Chuck Grassley, a Republican representing Iowa, said recent volatility in the price of oil confirms his long-standing concerns that energy security is on par with national and economic security.
"The U.S. economy should not be held hostage to geopolitical affairs dominated by the Organization of Petroleum Exporting Countries and autocratic regimes, such as China, Russia, Iran and Venezuela," he said.
Indeed, with the OPEC+ umbrella protecting the likes of Russia, Kazakhstan, Mexico and Azerbaijan -- all major crude oil producers in their own right -- price movements are seemingly controlled by a select few market players.
Global issues, meanwhile, have domestic consequences. Even though the U.S., for example, imported very little crude oil from Russia, broad-based market factors impact prices at home. After the European Union proposal on Russian oil materialized on Wednesday, the price for U.S. crude oil shot up 5.7%. The national average retail price for a gallon of regular unleaded gasoline, meanwhile, is $4.25, some 45% higher than year-ago levels. As global crude oil prices go, so too goes the price of domestic gasoline.
The U.S. Chamber of Commerce, however, suggested NOPEC legislation would only make matters worse. In a letter to Grassley, the group said NOPEC would open the door to global bickering and only exacerbate geopolitical tensions.
Although the bill is meant to limit trade restraints, the Chamber of Commerce said it would create a tit-for-tat precedent that would expose U.S. interests to foreign legal actions.
"Under reciprocal legal regimes, the United States and its agents throughout the world could be tried before foreign courts -- perhaps including the military -- for any activity that the foreign state wishes to make an offense," it stated.
If those concerns have merit, the bill's passage would only amplify the politicization of OPEC. Mohammed bin Salman, the de facto ruler of Saudi Arabia, has refused to take phone calls from U.S. President Joe Biden.
And it's almost assured that Russia is using its seat at OPEC+ for political gain.
The liberal world order cuts both ways. By herding multiple parties with multiple interests together, rogue behavior can in theory be moderated. But it can also create an us-versus-them mentality for which, given the realignment of the global world order underway in 2022, there is no easy relief.
Industrial Info Resources (IIR) is the world's leading provider of market intelligence across the upstream, midstream and downstream energy markets and all other major industrial markets. IIR's Global Market Intelligence Platform (GMI) supports our end-users across their core businesses, and helps them connect trends across multiple markets with access to real, qualified and validated project opportunities. Follow IIR on: LinkedIn.
