Pictured: Saudi Arabia’s King Salman bin Abdulaziz meets Chinese President Xi Jinping (not seen) at the Yamamah Palace in Riyadh, Saudi Arabia on December 08, 2022. (File Photo – Anadolu Agency via Getty Images/Anadolu Agency)
Jakarta, CNBC Indonesia – Relations between Saudi Arabia and the United States (US) are heating up. This was triggered because Uncle Sam’s country planned to establish a law on petroleum.
The US is known to be drafting the No Oil Producing and Exporting Cartels or No Oil Producing and Exporting Cartels (NOPEC).
In the new oil law, the US wants to apply a ceiling price for oil in oil producing countries that are members of OPEC+, led by Saudi Arabia, and non-OPEC countries that have large production such as Russia.
The NOPEC bill was designed to protect US consumers and businesses from spikes in oil prices. The bill could expose OPEC countries and their partners to lawsuits for orchestrating supply cuts that drive up global crude prices.
To go into effect, the bill needs to be passed by the full Senate and House of Representatives, before being signed into law by the president. Because the US adheres to a two-chamber system, this country has a Senate and a House of Representatives.
Meanwhile, in a new statement, Saudi Energy Minister Prince Abdulaziz bin Salman said NOPEC would make it difficult for OPEC+ countries to invest in production. This impact will be felt around the world on producers and consumers, as well as on the oil industry.
In particular, Saudi Arabia has already started efforts to expand its production capacity to 13.3 million barrels per day by 2027. This is also a stumbling block.
“The expansion is already underway, in the engineering stage, and the first upgrades are expected to enter service in 2025,” the prince said, quoted from Arab News, Wednesday (15/3/2023).
“Global emergency reserve capacity and stockpiles are the main safety net for the oil market in the face of potential shocks. I have repeatedly warned that global demand growth will exceed current global spare capacity, while emergency reserves are at historic lows,” he explained.
Abdulaziz also said the US maneuvers regarding the bill would not be followed by Riyadh nor other OPEC+ members. He said the move would only lead to global oil shortages.
Abdulaziz added that the OPEC+ group of oil producing nations had managed to bring significant stability and transparency to the oil market. Especially compared to all other commodity markets.
“The NOPEC Bill does not recognize the importance of retaining spare capacity, and the consequences of not retaining spare capacity on market stability,” he said.
(cap/luc)
