(Financial News) A number of US senators and congressmen are calling on US President Trump to put pressure on Saudi Arabia and force it to end the price war in the oil market.
Last week, Republican Senator Kevin Cramer called for an embargo on oil imports from Saudi Arabia, Russia and other OPEC countries. Not because American oil shales are not happy with lower oil prices – just to cope with this situation, it is necessary to reduce capital expenditures to the ratios that were last recorded when the Saudis tried to do the same from 2014 to 2016. The last time the US shale oil sector won. US administrations are making it clear that it has a “NOPEC Bill Bomb” weapon that can put an end to the price war. This applies to The No Oil Producing and Exporting Cartels Act (NOPEC).
The United States last threatened them in October 2018, when the Saudis allowed Brent to stay above the key level of $70 per barrel since March. The current presidential administration has counted and believes that any stable price of Brent above $70 per barrel is in an area where the benefits to American shale producers from higher prices outweigh the damage to the US economy. When the price of oil changes by $10 per barrel, the price per gallon of gasoline changes by 25-30 cents. And every cent for which the average price per gallon of gasoline is raised leads to the fact that consumer spending is reduced by $1 billion per year.
In any year, this is bad news for the current president of the United States. But at that particular moment in 2018, when the US tried to re-impose sanctions against Iran just a couple of months later, it seemed that Saudi Arabia took advantage of the US position, instead of helping its most important ally.
Given that the price of Brent oil from March to October was significantly higher than $70 per barrel, and in September it was trading at $85 per barrel.
The NOPEC bill
The NOPEC bill makes it illegal to artificially limit oil and gas production or set prices, as OPEC and Saudi Arabia do. Now it will be an elegant trick to prevent Russia from reanimating OPEC +, and not just OPEC. The bill will immediately abolish the sovereign immunity that exists in US courts against OPEC for both the entire group and each of its individual member states. Saudi Arabia will be open to prosecution under current antitrust laws of the United States, with all obligations, given that investments in the United States alone amount to $1 trillion. Then the United States will have the legal right to freeze all of Saudi Arabia’s bank accounts in the United States, confiscate its assets in the country, prohibit any use of US dollars by Saudis anywhere in the world, and begin the prosecution of Saudi Aramco, its assets and funds. Aramco may be ordered to split into smaller components, which does not violate competition rules in the oil, gas and petrochemical sectors and does not affect the price of oil.
Trump vetoed the NOPEC bill
The bill was almost passed when Trump stepped in and vetoed him after the Saudis did what he ordered them to do. Last February, the Judicial Committee of the House of Representatives approved the NOPEC Act, which opened the way for a vote on the bill in the House of Representatives. On the same day, Democrats Patrick Leahy and Amy Klobuchar, as well as two Republicans Chuck Grassley and Mike Lee submitted the NOPEC bill to the Senate. Even before that, the president stopped the full approval of the bill. In 2007, the House of Representatives and the Senate adopted the NOPEC law, in 2008 the House of Representatives adopted it again.
Trump has a big problem with OPEC. As the US unilaterally withdrew from a nuclear deal with Iran in May 2018, Trump believes OPEC and Saudi Arabia are “seeking to take advantage of the short-term supply constraints that have arisen as a result of US efforts to force Iran to return to the negotiating table to improve the deal for the United States, through the imposition of sanctions, “says one source in Washington. In addition to telling Saudi King Salman that he and his family would not have been in power if it hadn’t been for U.S. support, Trump accused OPEC of a multi-month spike in oil prices in 2018. Later, in September 2018, at the UN General Assembly, he added that OPEC was “robbing the whole world.” Soon after, Trump told reporters when asked about the NOPEC bill:
“The US is committed to an open, fair and competitive market for global energy trading. We do not support dishonest, ugly market behavior, including from cartels.”Donald Trump