America must reduce its vulnerability to OPEC actions

Since the Organization of the Petroleum Exporting Countries’ (OPEC) first meeting was held, a core mission has been to use its competitive advantage in production to manage output and influence prices. As the group controls more than 80 percent of global reserves, its ability to affect prices by withholding or increasing production has always affected the U.S. economy, from the shortages of the 1970s to the recent price collapse in 2015. In order to enhance American energy security and protect American businesses, the Trump administration has rightly identified OPEC as an obstacle to this goal.

On May 25, OPEC meets again for the first time since agreeing to cut production levels in November 2016, and all signs point toward another round of market manipulation with national oil companies (NOCs) of other oil-rich countries, including Russia. Just last week reports stated Saudi Arabia, the global swing producer and de facto OPEC leader, agreed with Russia to extend the cuts by nine months and hopes to implement this agreement across the organization when they meet in Vienna.

{mosads}Securing America’s Future Energy (SAFE) believes this collusion endangers both our economic sovereignty and national security, and is committed to mitigating the vulnerabilities it perpetuates in the American transportation sector. Transportation is a two-trillion dollar per year industry dependent on oil to power 92 percent of its network. This sector is a critical, yet uniquely undiversified driver of our country’s economy. The electricity sector, for comparison, is powered by a diverse set of sources including gas, coal, wind, solar, nuclear, geothermal, and hydropower.

This extreme dependence on oil leaves America’s transportation system decidedly vulnerable to the volatility of global oil prices — and exposes us to the actions of OPEC members, and other oil market disruptions.

To counter our oil reliance, SAFE argues for a range of policy responses that will collectively advance our energy security, and diversify our nation’s transportation sector for the first time. These options include increased domestic oil production in order to reduce our reliance on foreign imports while creating U.S. jobs and reducing our balance of payments, taking steps to modernize our fuel economy standards to better accommodate new connected and autonomous driving technologies and business models like ride-sharing, and increasing the use of advanced fuel sources such as electricity, natural gas and hydrogen in the transportation sector so we are no longer dependent on one fuel source.

However, to combat an issue that affects consumers, businesses and industries across the United States, we know this needs a response from the highest levels of government. Legislation introduced by Reps. Kevin Cramer (R-N.D.), Collin Peterson (D-Minn.), Trent Franks (R-Ariz.) and David Scott (D-Ga.), H.R. 545 calls for the creation of a congressional commission to investigate OPEC’s and NOC’s influence over the global oil market and propose the policies that are needed to counter this unfree and volatile oil market.

Oil is, and will always be, a globally-priced commodity. For this reason America will always remain vulnerable to price spikes and crashes, no matter how much we drill at home. Despite a growing sense, U.S. shale has ended oil dependence, this is simply uncertain when looking years and decades into the future. Moreover, instability in any one of a number of oil producing countries — Saudi Arabia, Venezuela, Iran, Russian, Nigeria — would cripple the global economy, forcing the U.S. and her allies to respond, possibly even militarily. 

A direct example of this vulnerability was in November 2014, with fear of losing market share to U.S. shale, OPEC maintained high levels of production. This intentional oversupply caused prices to tumble. Between July 2014 and February 2016, oil prices dropped from $110 per barrel to just $26, leading hundreds of U.S. oil and gas companies into bankruptcy displacing capital and causing the loss of approximately 150,000 jobs.

If this bipartisan bill passes, it will assess the current oil market and provide recommendations to mitigate OPEC and other NOCs actions, and propose a wide-range of policies focused on diplomacy, trade, legal, regulatory and statutory options for President Trump and Congress to enact. 

The Trump administration defined its energy policy as a strategic priority for America’s economic and national security. As OPEC and other NOCs look once again to manipulate the oil market at the expense of American producers, consumers and businesses, the need for this congressional commission is more urgent than ever.

Robbie Diamond is the founder, president and CEO of Securing America’s Future Energy (SAFE).

The views expressed by contributors are their own and are not the views of The Hill.