The growing anti-OPEC movement is disastrous for the oil markets

Earlier this year, then Italian Prime Minister Mario Draghi pitched the idea that big oil buyers would unite and resist OPEC +. The idea didn’t go much beyond the floating phase because one obvious problem could not be ignored: OPEC would retaliate. Yet it seems that some ideas tend to be so attractive that they resurface, again and again, in slightly different forms. The idea of ​​an anti-OPEC buyers’ club has also resurfaced, and more, but a NOPEC bill has passed in the US Senate and, according to media coverage, has a chance to pass.

Some, however, have gone beyond one bill. A Bloomberg reporter, Carl Pope, recently detailed his vision of an anti-OPEC grouping, which manages to combine the idea of ​​affordable oil and a push for the electrification of transport. Again, the problems are too obvious to ignore.

For starters, Pope suggests that in the event that the NOPEC bill is successful, the US could start punishing OPEC + members by imposing fines, import duties, and even sanctions, as well as banning access to markets. public finance companies to national oil companies such as Aramco and Rosneft.

The message here appears to be along the lines of “This will show them,” but this message ignores the fact that firstly, Rosneft is already heavily sanctioned and cut off from Western financial markets, and secondly, Aramco isn’t exactly Chevron or Shell. , and although it has exploited the markets several times recently, it is questionable whether it is so dependent on external finance that it suffers serious damage from such measures.

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The other fact that Pope’s idea seems to ignore is that such punitive measures would essentially mean that OPEC + oil would become more expensive for countries taking the measures. Any oil becomes more expensive, in fact, when sanctions or tariffs are introduced on a third of the global supply. Again, this wouldn’t be bad news for oil sellers, including the United States, but it would certainly be bad news for buyers, once again, including the United States.

The alternative to OPEC proposed by Bloomberg’s pope is what he calls a Clean and Affordable Transportation Organization. The Pope says it should be made up of “responsible producers and consumers of oil”. This means that the United States, Canada and Norway on the producer side and virtually all but OPEC + on the consumer side. Not many producers are responsible.

The idea appears to follow the pattern of the so-called US-led friendship push in critical minerals. For now, the push aims to redesign supply chains for the energy transition and reduce China’s overwhelming dominance in the extraction and processing of critical minerals. The idea, like Pope’s OCAT, is to rely on friendly producers of the raw materials needed for the transition. The problem, as with OCAT, is that such friendly producers can only provide a fraction of the supply needed for the transition.

The Washington administration likes to control all kinds of prices. She also likes to control the oil supply, although so far she has failed to achieve anything like control, even at home, let alone OPEC +. In fact, the US oil industry is very much against a NOPEC law because it knows how the oil market works.

As stated by the president and chief executive of the industry lobbying group, the American Petroleum Institute Comments on the latest developments around the NOPEC bill, “it would create further instability in the market and aggravate the existing challenges in international trade. Such legislation would be useless in any past, present or future market conditions. “

The United States and the European Union, which the Pope suggests should form the new Anti-OPEC Organization for Clean and Affordable Transportation, have already made a serious mistake with Russia. They assumed that whatever they threw at them in terms of sanctions and asset freezes, Russia would not retaliate because it needs Western markets.

Now, NOPEC supporters seem to be making the same dangerous assumption: that OPEC + will not retaliate against the punitive actions of the West. And that the West can survive longer without OPEC + oil than OPEC + can survive without selling its oil to the West. As we can see from what has happened in Europe in recent months, this is a highly questionable hypothesis.

The hopes behind an anti-OPEC push are hopes of greater control of the global oil market in order to avoid price spikes that harm economies. The reality is that such control is impossible for a group of countries that includes only three oil-producing states of any respectable size plus the UK, an oil powerhouse in decline thanks to the government’s transition plans.

In any market, it’s not so much who accounts for most of the demand that can move the market where it wants. This is who accounts for the majority of the offer. This is perhaps the best argument in favor of the energy transition and electrification of transport, so it is a real shame that China looms so much in that department, just as Saudi Arabia, Russia and their OPEC + friends loom over. Petroleum.

By Irina Slav for Oilparmi

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