Thursday’s passage of the ‘No Oil Production or Export Cartel’ (NOPEC) bill by a US Senate committee is a sure sign that Washington has finally run out of patience with Saudi Arabia and the Saudi-led Petroleum Export Organization. The country (OPEC), in its indifference to its handling of high oil prices, its continued dealings with Russia, a key member of ‘OPEC+’, and their continued drift towards the Sino-Russia axis of power. Washington has decided the time may be right to act on its former allies and loosen Damoclean. Sword NOPEC Bill if necessary, it seems.
The former is huge for Saudi Arabia, OPEC and OPEC+ key member Russia as the NOPEC Bill, as analyzed in depth in all my books on the oil sector from 2014, including at length most recent, has a broad mandate that allows it to declare it illegal to artificially prohibit oil production or set prices. OPEC was specifically mandated upon its foundation in 1960 to ‘coordinate and integrate petroleum policies’ of all its member states – effectively setting oil prices. Given that OPEC members account for about 40 percent of the world’s crude oil production, their oil exports account for about 60 percent of the total petroleum traded internationally and more than 80 percent of the world’s proven oil reserves, Its impact on the global oil market has been like a cartel. The NOPEC Bill, if and when enacted, would immediately and dramatically halt any and all actions or statements of OPEC in particular, and its principal members, and Saudi Arabia, its de facto leader. This would include statements related to coordinated oil production cuts or increases and the organization or any of its key members, including Saudi Arabia, forecasting future production levels or oil prices. It would also immediately remove the sovereign immunity existing in US courts for OPEC as a group and for its individual member states. This would leave Saudi Arabia open to trial under existing US anti-trust law, with its total liability estimated at US$1 trillion investment in the US alone, plus an in-depth analysis. My new book on global oil markets,
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For Saudi Arabia, it would also mean the effective value of its major oil and gas giant, Saudi Aramco may be void, noting that it is the major corporate instrument used to manage the oil flow of the de facto leader of the world’s leading de facto oil cartel. Although Saudi Aramco is not directly involved in policy-making, the US and UK antitrust law allows Aramco to adjust its output to help manage oil prices and price through statements by its key corporate executives. – May indicate as collusion in determination. About the company’s future production levels and its price expectations. This view is further reinforced by the fact that such a small percentage of its shares were issued in its initial public offering in December 2019 and that it was clarified at the time of the offering that the company be operationally guided by the government of Saudi Arabia. In fact, Saudi Aramco’s Chief Executive Officer Amin Nasser said at the time of the IPO that Saudi Aramco’s oil and gas production decisions were sovereign affairs Which will remain with the government. It would also mean that trading in Aramco’s products – including oil – would be subject to antitrust legislation, which means a prohibition of sales in US dollars. It would also mean Aramco’s break up into much smaller constituent companies that are not able to influence the price of oil if the Saudis cannot provide some other way to comply with anti-trust laws.
Should the situation arise for the end-use of the threat of the NOPEC Bill, it is a function of three factors. the first one was broken corps 1945 agreement The then US President, Franklin D. Roosevelt and the then Saudi King, Abdulaziz aboard the US Navy cruiser Quincy in the Suez Canal. The deal they agreed on, which went relatively smoothly for years, was that as long as Saudi had oil, the US would receive all oil supplies, in exchange for which the US would guarantee the security of both. The ruling House of Saud and, by extension, Saudi Arabia. Although there was a bump in the road with the 1973/4 oil embargo, the real challenge to the deal came in the 2014-2016 oil price war launched by Saudi Arabia. With the prime objective of destroying or at least severely disabling the then-nascent US shale oil field. Especially since the early days of former President Donald Trump’s administration, NOPEC bill in danger of being passed This was used to ‘persuade’ the Saudis to adhere to the ‘Trump oil range’ – a floor of US$35-40 per barrel of Brent (the price from which most US shale oil producers could make a profit) and the US A cap of $75- 80 pb (above which was likely to have a negative economic impact on the US). RELATED: China’s biggest refiner has no plans to extract cheaper Russian oil
The second reason is the apparent indifference of Saudi and OPEC to help propel oil prices right now, to the extent that Saudi Crown Prince Mohammed bin Salman (and Abu Dhabi’s Crown Prince, Mohamed bin Zayed Al Nahyan) even that refused to take immediate telephone call From President Joe Biden on this topic. For the US economy, historical precedent highlights that every US$10 per barrel change in the price of crude oil results in a 25–30 percent change in the price of a gallon of gasoline. The corollary long-standing rule of thumb is that for each the one percent that the average US gasoline price increasesLosses in excess of US$1 billion per year in additional discretionary consumer spending. Politically, it is a matter of historical fact, as shown in My new book on global oil markets, that since World War I, the incumbent US president has won re-election 11 out of 11 times if the US economy was not in recession within two years of the upcoming election. However, the president who went into re-election campaign with the economy in recession won only once out of seven. President Biden – or whatever the Democratic nominee is – will face another presidential election in 2024, but even before that, he faces crucial midterm elections in November 2022, when his Democrats could lose your narrow majority in the House of Representatives.
A third reason for America’s growing anger at Saudi Arabia and OPEC’s disregard for past agreements and assurances made with the US is that they are getting closer to the Sino-Russia axis of power all the time and Washington now sees this more fully. Is. A political turning point has been reached which turns into a true ‘Zero Sum Game’. Saudi Arabia has pushed for broadening and deepening cooperation of Arab states in general terms and in particular through the Gulf Cooperation Council (GCC), and appears to be moving forward Towards China’s sphere of influence At least since 2016. This was highlighted by a recent series of meetings in beijing Between senior Chinese government officials and the foreign ministers of Saudi Arabia, Kuwait, Oman, Bahrain and the Secretary-General of the Gulf Cooperation Council (GCC). At these meetings, the main topics of conversation were to eventually seal the China-GCC free trade agreement and “deepen strategic cooperation in a region where US dominance is showing signs of retreat,” According to local news reports,
The ‘NOPEC Bill’ has previously come very close to being fully enacted, notably in February 2019 when it was passed by the US House Judiciary Committee, paving the way for a vote on the bill before the full House of Representatives. Had given. That same day, Democrats Patrick Leahy and Amy Klobuchar and – most notably – two Republicans, Chuck Grassley and Mike Lee, introduced the NOPEC bill in the Senate. This time, the ‘NOPEC bill’, sponsored by senators including Republican Chuck Grassley and Democrat Amy Klobuchar, passed 17-4 in the Senate Judiciary Committee. From this point on, presumably if Biden’s administration doesn’t think Saudi Arabia and OPEC will become more allies in the future, the ‘NOPEC bill’ will go to the full Senate and House and then be signed by President Joe Biden to become law.
By Simon Watkins for Oilprice.com
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