Leahy Among Senators Saying ‘NOPEC' To OPEC And Joins In Calling On Bush To Deploy Reserve To Lower Oil Prices
partisan Plan Would Permit Legal Action Against Oil Cartel
Sen. Patrick Leahy has introduced bipartisan legislation to allow the U.S. Department of Justice and the Federal Trade Commission to file antitrust lawsuits against foreign states – such as members of the Oil Producing and Exporting Countries (OPEC) – for price fixing and other anticompetitive activities. High oil import costs this year have driven up gasoline prices and home heating oil costs for Vermonters and others this winter.
Leahy (D-Vt.), along with Sens. Mike DeWine (R-Ohio) and Herb Kohl (D-Wisc.), the chairman and the ranking Democratic member of the Judiciary Committee's Subcommittee on Antitrust, Business Rights and Competition, introduced a bill Tuesday in response to skyrocketing gas prices across the nation, which can be partially attributed to price-fixing activities of the OPEC countries. Leahy is the ranking Democratic member of the Judiciary Committee and has sponsored similar bills in previous years.
“I wish this bill was on the books today and available for use against the oil cartel. OPEC nations openly conspire to violate the norms of our antitrust laws,” said Leahy, who also is a senior member of the antitrust panel. “And yet they expect to do business with the United States and to continue to reap the benefits of this relationship.”
On Wednesday, Leahy was also one of more than a dozen senators, including Sen. Charles Schumer (D-N.Y.), who sent a letter to President Bush urging him to tap the Strategic Petroleum Reserve (SPR) as a way to combat record-high gas prices. Releasing oil from the reserve has brought costs down in the past, most recently in 2000 when President Clinton deployed from the SPR and the price of home heating oil fell 10 cents in one week, Leahy said. The bipartisan group of senators sent the letter Wednesday. (Text of the letter below)
The new bill, "The No Oil Producing and Exporting Cartels Act" (NOPEC), drops OPEC and other nations from the protections of Foreign Services Immunity Act, (FSIA), to the extent that those governments are engaged in price fixing or other anticompetitive activities with regard to pricing, production and distribution of petroleum products. NOPEC would make OPEC's activities actionable under antitrust laws. The bill also authorizes lawsuits in U.S. federal court against oil cartel members by the Justice Department and the Federal Trade Commission.
Leahy has raised concerns that oil companies are profiting at the expense of American consumers. On average, gas prices have reached $2.00 per gallon and could climb higher, according to experts.
A spike in crude oil prices has led to sharp increases in the price of home heating oil and diesel fuel throughout the Northeast and across the country. Last month, heating oil customers in Vermont were paying almost $2 per gallon, 25 percent higher than last year, according to the Vermont Department of Public Service.
"This price-gouging by overseas oil cartels will put a strain on Vermonters who need to be able to afford the oil that heats their homes," said Leahy. “Our economy, our farmers, and our families need relief now.”
Under current law, antitrust actions may be filed against private companies, but OPEC nations are currently protected by the FSIA, which allows for the prosecution of foreign governments who are engaged in ‘commercial activity,' but prohibits prosecution in those states are engaged in ‘governmental activity.' A federal court has ruled that the actions of OPEC are governmental actions and thus not commercial activity.
Leahy has also pushed for tighter regulation of oil, natural gas, and other futures transactions on the Commodity Futures Trading Commission (CFTC). It is critical to protect the integrity of oil and natural gas markets in addressing America’s energy needs, said Leahy, who has encouraged stronger congressional oversight of anti-fraud and anti-manipulation of these sometimes-volatile markets.
# # # # #
March 9, 2005
The Honorable George W. Bush
The White House
1600 Pennsylvania Avenue
Washington, DC 20500
Dear Mr. President,
With the price of crude oil having recently surged to near record levels and possibly reaching even higher in the near future, we urge you to act now to reduce skyrocketing prices at the gasoline pump by deferring oil deliveries and releasing a portion of the Strategic Petroleum Reserve (SPR) through an oil swap. The rising price of gasoline is already beginning to place a financial strain on consumers that could threaten the nation’s economic security. These increases are made even more troubling by the fact that the summer driving season, which is when demand and prices traditionally rise, has yet to arrive. If left unchecked this summer, these high gasoline prices will continue to burden our economy by taking desperately needed money out of the hands of working families and placing it into the pockets of OPEC.
On Friday, the price of crude oil on the New York Mercantile Exchange (NYMEX) closed at the nearly record setting level of $53.78, and crude oil has been trading at above $50 per barrel since February 22nd. This sustained and extremely high price of oil has already burdened families this winter by increasing the national retail price of heating oil by over 27 percent this winter. In addition, national average retail gasoline prices have increased by almost $0.07 per gallon to reach $2.00 and some analysts predict that prices could increase by $0.24 per gallon before gasoline prices fully reflect the recent spike in crude oil prices. It has been projected that such an increase could cost our nation’s consumers as much as $90 million per day.
These recent, astronomical price increases have in large part been precipitated by OPEC’s decisions to reduce oil production to 27 million barrels per day and to formally abandon its $22-28 price target. These actions represent an attempt by OPEC to enhance profits by institutionalizing drastic oil price spikes. As a result of these higher prices, OPEC’s members increased their profits last year by over $86 billion. Recent reports indicate that some OPEC members, such as Venezuela, may be willing to support a new target price of between $40-$50 per barrel.
In spite of the economic threat created by OPEC’s market manipulation, the Administration has continued to adhere to its policy of taking oil off of the market and placing it in the SPR. This policy, which further tightens oil markets by taking much needed supplies out of commerce, is slated to take over 7 million barrels of oil off of the market in March and an average of 92,000 barrels per day off of the market during the height of the driving season between April and the end of August, despite the fact that the SPR is currently over 97 percent full. Instead of exacerbating the economic burdens OPEC has created for working Americans, we urge you to counteract the cartel’s supply cuts and calm the markets by deferring deliveries of oil to the SPR and releasing oil from the SPR through a swap.
Initiating a swap of oil from the SPR to increase the supply of oil is a proven way to reduce the price of gasoline and heating oil. In the fall of 2000, the Clinton Administration announced a swap of 30 million barrels over 30 days, causing crude oil prices to quickly fall by over $6 per barrel and wholesale gasoline prices to fall $0.14 per gallon. Under a swap, the federal government could decide on a set quantity of oil to release from the SPR, and accepts bids from private companies for the rights to that oil. The companies would then bid on how much oil they are willing to return, in addition to the oil they would receive under the swap, to the SPR at a later date.
An oil swap would result in a win-win situation where gasoline prices are lowered and long-term contributions to the SPR are augmented at no additional cost to the taxpayer. The SPR is intended to provide relief at times when working families are struggling to make ends meet. That time is now. The summer driving months are just around the corner. We ask that you use the SPR and safeguard America’s economic recovery.
Press ContactDavid Carle: 202-224-3693
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