20190228 opec saudi arabia oil

Punishing OPEC would be a huge mistake for the US

Updated 1547 GMT (2347 HKT) March 1, 2019

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Dan K. Eberhart is CEO of Canary, an independent oilfield services company in the United States, and a frequent commentator on oil markets and US politics. The opinions expressed in this commentary are his own.

Perspectives dan k eberhart

Congress has been debating the No Oil Producing and Exporting Cartels Act, or "NOPEC," which would make international oil cartels illegal, exposing countries that coordinate on the price of oil to the risk of litigation in US courts.

The odds are pretty good that anti-OPEC (Organization of the Petroleum Exporting Countries) legislation could eventually win the approval of Congress, given rising anti-Russian and Saudi Arabia sentiment, including anger over President Trump's response to the murder of journalist Jamal Khashoggi, and the subsequent resurgence of progressive Democrats in the House of Representatives.
For decades, OPEC has been an economic bogeyman to the United States, and for much of the time since its founding in 1960, the cartel has deserved that status. But the time to see OPEC, particularly Saudi Arabia, as an enemy has passed. Punishing OPEC would be a mistake, no matter how popular it is with voters.
American consumers and policymakers have not forgotten the oil embargoes and gas lines of the 1970s, the remarkable run-up in oil prices to nearly $150 a barrel in 2008, or the price collapse in 2014 the drove companies into bankruptcy and cost American jobs, all prompted by the anti-market activities of OPEC. But over the past five years, OPEC has become an integral partner in America's energy security by regulating the supply of oil and maintaining a generally fair oil price.
OPEC's moderating role has allowed the US oil sector to achieve record oil production and has made America a major energy exporter — something that seemed impossible less than a decade ago. More often than not in recent years, the cartel has succeeded in keeping the price of oil just high enough to spur investment in new shale fields, but low enough to keep consumers happy.
Consistently hitting such a sweet spot is no easy task, and it's why the Saudis should be considered a partner rather than an adversary. What may not be understood in the marble halls of Congress is that OPEC, particularly Saudi Arabia, Kuwait, Iraq and the United Arab Emirates, hold the lowest-cost oil reserves in the world. Iran also has vast reserves of low-cost conventional oil, but US sanctions have mostly sidelined its production.