The Senate Judiciary Committee’s anti-trust subcommittee will hear from Makan Delrahim, Assistant Attorney General for Anti-Trust Division, on Wednesday afternoon.
The hearing is being advertised as “Oversight of the US Enforcement of Anti-Trust Laws” so the NOPEC bill is not the main focus of the hearing but will likely be one of many issues the subcommittee will discuss. Senator Chuck Grassley (R-Iowa), who is a member of the subcommittee and Chairman of the full Judiciary committee, is the author of the NOPEC bill in the Senate. Grassley and House Judiciary Committee Chairman Bob Goodlatte (R-Virginia) sent a letter on August 21 to Delrahim asking for the administration’s views on the legislation. We think it is unlikely that they got a response yet which is why we believe the topic to be raised at Wednesday’s hearing.
We expect it to be the first time that the Trump Administration will go on the record on the so-called “NOPEC” legislation introduced in both the House and Senate. To date, Trump has been largely silent on it much to the dismay of the bill's backers. This is important because previous Presidents have opposed the legislation for diplomatic reasons but Trump is viewed as a wildcard and seen as potentially supporting and signing a bill.
As a private citizen and then a former Deputy Assistant AG in the Bush administration, Delrahim strongly supported the NOPEC legislation saying in an oped in the Hill newspaper in 2008 that OPEC “has been flagrantly violating U.S. and foreign antitrust laws for decades with impunity.”
Delrahim’s oped does not mean this will be the Trump policy but there is no way he is testifying on the topic without getting the White House approval on his comments. We think at the very least, he will say that they are studying the issue and keeping the option alive for Trump.
The NOPEC legislation, which allows anti-trust enforcement on OPEC and its members by removing the sovereign immunity exception, has caused concern in Vienna and Riyadh. The legislation was all the buzz at OPEC’s June meeting in Vienna after it was introduced as gasoline prices rose during the high demand summer driving season. In our view, it was one of the key reasons why OPEC unanimously approved the 1 million b/d production hike in June.
In our view, passage of the legislation would be very tough to get done before the election with limited legislative days. But two things can change that: 1) Trump starts calling for it to be passed - in which case the Congressional leadership would likely allow votes to be held before the election; and/or 2) oil flirts with $90 in which case we believe the legislation gains major momentum and we would raise the odds of floor votes to 60 percent especially before the election. If you are a member of Congress running for reelection, you will want a floor vote you can point to that shows some action on high oil prices. Both of the above are dependent on prices rising.
Saudi Arabia and OPEC are keen not to give the legislation momentum as least before the US election in November. The live feed, which will be watched closely in Vienna, can be viewed here.
