Why Is Opec Legal
OPEC has not been involved in disputes related to World Trade Organization competition rules, although the objectives, actions and principles of the two organizations differ considerably. [149] In an important U.S. District Court decision, OPEC consultations were protected by the Foreign Sovereign Immunities Act as “state” state acts and therefore did not fall within the legal scope of U.S. competition law for “commercial” acts. [150] [151] Despite general sentiment against OPEC, legislative proposals to limit the organization`s sovereign immunity, such as the NOPEC Act, have so far failed. [152] A “benchmark crude oil” is a standardized petroleum product that serves as a favourable reference price for buyers and sellers of crude oil, including standard contracts on major futures markets since 1983. Reference prices are used because oil prices differ (usually by a few dollars per barrel) based on quality, quality, date and place of delivery, and other regulatory requirements. [162] [163] And so we tolerate an illegal cartel whose members include Russia under warmongering Vladimir Putin. OPEC has considered suspending Russia from its recent production targets, which will theoretically increase by 638,000 barrels per day next month (although member countries have not met previous targets). In the end, she decided not to. No one expects Russia to meet the target (its oil production is down, not up), so it didn`t really matter in that sense. But excluding Russia would have given Saudi Arabia the freedom to significantly increase its own production by filling Russia`s allocation.
This is something that the U.S. has asked them to do in order to bring down gasoline prices. Now that will no longer be the case. The Saudis probably calculated that if there was no impact on the assassination of the Washington Post columnist by Crown Prince Mohammed bin Salman in 2018, it would be doubtful that keeping Russia in OPEC`s warm embrace would have any impact. For 62 years, the United States has tolerated the existence of an illegal international oil cartel under the Sherman Antitrust Act, the Wilson Tariff Act and, since 1974, the Antitrust Procedures and Penalties Act (which allows for the criminal prosecution of foreigners participating in international cartels). Over the past three decades, the Department of Justice has dismantled international cartels for a variety of raw materials, including vitamins, liquid crystal billboards and feed additives. He even blew up South Korean oil refineries. But the oil cartel is free. In May, the Senate Judiciary Committee advanced the Oil Non-Production and Export Cartels Act (NOPEC), which removes every conceivable legal hurdle, real or imagined, to break the oil cartel.
The House Judiciary Committee pushed it forward last year. NOPEC is a bipartisan favorite that has been introduced in every Congress over the past 22 years. (The first bill was sponsored by former Democratic Senator Herb Kohl of Wisconsin.) But the US oil companies (which of course benefit from OPEC pricing) are still against NOPEC, and it`s going nowhere. During this cycle, the White House expressed concern about unintended consequences (a more direct opposition would have been uncomfortable because a Senator Joe Biden co-funded NOPEC in 2006), and it is doubtful whether the bill will make it to the House of Representatives or Senate this year. On this basis, OPEC would be a cartel within the meaning of EU competition rules, but only if the Member States were `undertakings`. The Courts of the European Union have held that the concept of undertaking covers any entity carrying out an economic activity, irrespective of its legal status and the method of financing. For public and governmental organisations, their subjection to competition rules depends on the type of activity in which they operate, whether or not they are an `undertaking`. In the FININ case, which was the subject of a reference procedure in the EU, it was found that public institutions were not companies if they only purchased medical products which were then used in the national health system. However, the supply of goods or services in a market would constitute an economic activity. On this basis, there is little doubt that OPEC member states would be companies if the EU competition authorities so wished. In the 1990s, OPEC lost its two youngest members, who had joined in the mid-1970s. Ecuador withdrew in December 1992 because it was unwilling to pay the $2 million annual fee and believed it needed to produce more oil than allowed by the OPEC quota,[65] although it joined in October 2007.
Similar concerns led Gabon to suspend its membership in January 1995; [66] She was reinstated in July 2016. [2] Iraq has remained a member of OPEC since the organization`s inception, but Iraqi production was not part of OPEC`s quota agreements from 1998 to 2016 due to the country`s enormous political difficulties. [67] [68] When nations, groups or individuals come together to achieve a common goal, their aspirations and goals are often expressed in the form of a declaration of principles or a “statute.” Upon adoption, the statute becomes a formal instrument governing the scope and powers of the group or organization. It can be changed as the organization grows. In 2019, for example, Saudi Arabia threatened to sell its oil in currencies other than the dollar if Washington passed a version of the NOPEC law. This would undermine the dollar`s status as the world`s leading reserve currency, reduce Washington`s influence in global trade, and weaken its ability to enforce sanctions against nation-states. Some of the world`s largest oil-producing countries, such as Russia, China and the United States, are not part of OPEC. If the bill is signed, the U.S. attorney general would have the ability to sue the oil cartel or its members, such as Saudi Arabia, in federal court. Other producers, such as Russia, which is working with OPEC in a larger group called OPEC+ to suspend production, could also face lawsuits.
OPEC`s influence on the market has been widely criticized. Since its member countries own the vast majority of crude oil reserves (79.4%, according to OPEC`s website), the organization has considerable power in these markets. As a cartel, OPEC members have a strong incentive to keep oil prices as high as possible while maintaining their share of the global market. In the run-up to his invasion of Kuwait in August 1990, Iraqi President Saddam Hussein urged OPEC to end overproduction and raise oil prices in order to financially help OPEC members and accelerate reconstruction after the 1980-1988 Iran-Iraq war. [64] But these two Iraqi wars against other OPEC founders marked a low point in the cohesion of the organization. And oil prices fell rapidly after short-term supply disruptions. Al Qaeda`s attacks on the United States in September 2001 and the U.S. invasion of Iraq in March 2003 had an even more moderate impact on oil prices in the short term, as Saudi Arabia and other exporters once again worked together to adequately supply the world.
[63] The Oil Production and Export Cartel Prohibition Act (NOPEC) is intended to protect the United States. Consumers and businesses are experiencing technical spikes in the cost of gasoline and fuel oil, but some analysts warn that implementation could also have dangerous unintended consequences. In the years following 1973, as an example of so-called “checkbook diplomacy,” some Arab countries were among the world`s largest donors of foreign aid,[38][39] and OPEC added to its objectives the sale of oil for the socio-economic growth of the poorest countries. The OPEC Special Fund was established in Algiers, Algeria, in March 1975 and officially established the following January. A solemn declaration reaffirmed the natural solidarity that unites OPEC countries with other developing countries in their struggle to overcome underdevelopment and called for measures to strengthen cooperation among these countries.
