The Growing Anti-OPEC Movement Is A Disaster For The Oil Market

Earlier this year, Italian Prime Minister Mario Draghi floated the idea of ​​big oil buyers uniting and standing up for OPEC+. The idea did not advance beyond the floating stage 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 not only that, but the NOPEC bill has moved to the Senate in the United States and, according to media coverage, has a chance of passing.

Some, however, have gone more than one bill. A Bloomberg columnist, Carl Pope, recently DETAIL His vision is about an anti-OPEC group, which manages to combine the idea of ​​both affordable oil and the push for the electrification of transport. Again, the problems are too obvious to overlook.

For starters, the Pope indicated that if the NOPEC bill is successful, the US can start punishing OPEC+ members by imposing fines, import tariffs, and even sanctions, as well as banning access to the common financial market to national oil companies such as Aramco and Rosneft. .

The message here seems to be along the lines of “It will show them,” but this message ignores the fact that first, Rosneft has been heavily punished and cut off from Western financial markets, and second, Aramco is not Chevron or Shell. , and while it has just tapped the market several times, it is questionable whether it is so dependent on external finance that it will suffer serious harm from such a measure.

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Another fact that the Pope’s idea seems to ignore is that such a punitive measure basically means that OPEC + oil will be more expensive for the countries that use the measure. Any oil becomes more expensive, well, when sanctions or tariffs are introduced on a third of the global supply. Again, this won’t be bad news for oil sellers, including the US, but it will be bad news for buyers – again, including the US.

An alternative to OPEC proposed by Pope Bloomberg is what he calls the Organization for Clean and Affordable Transport. The Pope said it should be made up of “responsible oil producers and consumers”. This means the US, Canada, and Norway on the production side and pretty much everyone except OPEC+ on the consumption side. It’s not that many manufacturers are responsible.

The idea seems to follow the so-called push friend-shoring model led by the United States in critical minerals. For now, the push aims to redraw supply chains for the energy transition and reduce China’s overwhelming dominance in mining and processing of critical minerals. The idea, like Pope OCAT, is to rely on friendly producers of the raw materials needed for the transition. The problem, like OCAT, is that such friendly producers can only provide a fraction of the supplies needed for the transition.

The administration in Washington likes to control all kinds of prices. They also like to control the supply of oil, although they have failed to implement anything resembling control so far, even at home, let alone in OPEC +. Indeed, the US oil industry is strongly against the NOPEC law because they know how the oil market works.

As the president and chief executive of the industry lobby group said the American Petroleum Institute in commentary in the latest developments around the NOPEC bill, it “will create further instability in the market and exacerbate existing challenges in international trade. Such legislation will not help in any market situation in the past, now or in the future.

The US and the European Union, which the Pope has proposed should form a new anti-OPEC Organization for Clean and Affordable Transport, have made a fatal mistake with Russia. They think that whatever they throw at them in terms of sanctions and asset freezes, Russia won’t reciprocate because they need Western markets.

Now, NOPEC supporters seem to be making the same dangerous assumption: that OPEC+ will not retaliate against punitive actions from 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 the last few months, this is a questionable assumption.

The hope behind the anti-OPEC push is the hope to control the global oil market so that price spikes that harm the economy are avoided. The reality is that such control is impossible for a group of countries that only includes three oil-producing countries of respectable size plus the UK – oil power is declining thanks to the government’s transition plan.

In any market, it’s not so much about who represents the most demand that they can move the market where they like. It’s about who represents the most supply. This is probably the best argument in favor of energy transition and electrification of transport, so it is a bit unfortunate that China looms so big in that department, like Saudi Arabia, Russia, and their friends in OPEC + loom big in oil.

By Irina Slav for Oilprice.com

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