Hearing of Senate Judiciary Committee Statement: "No Oil Producing and Exporting Cartels Act of 2005"

Hearing of Senate Judiciary Committee Statement: "No Oil Producing and Exporting Cartels Act of 2005"

Mr. Chairman, I appreciate your efforts in putting this bill on today's agenda. We have a number of Judiciary Committee sponsors and cosponsors of this legislation, including Antitrust Subcommittee Ranking Member Kohl, the Chairman and Ranking Member of the full Judiciary Committee, Senators Specter and Leahy, and Senators Grassley, Feingold, Schumer, and Durbin. This is a bill whose time has come. I have sponsored this bill to address the long-standing problem of foreign governments colluding to fix, allocate, and establish production and price levels of petroleum products.

This bill enjoys strong bipartisan support because it is a simple bill that makes good sense. NOPEC removes any doubt that the Department of Justice and the Federal Trade Commission may bring an antitrust enforcement action against foreign states engaging in the restraint of trade with regard to oil and other petroleum products. NOPEC does this by amending the Sherman Antitrust Act and the Foreign Sovereign Immunities Act (FSIA).

In 1979, a Federal District Court found, I believe incorrectly, that OPEC's price-setting decisions were "governmental" acts -- not "commercial acts" -- and accordingly that they were given sovereignty status and protected by the FSIA. Similarly in 1981, in the same case on appeal, a Federal Court of Appeals declined to consider the case against OPEC based on the so-called "act of state" doctrine. NOPEC effectively reverses these decisions.

As a result, under NOPEC, the Department of Justice and the Federal Trade Commission may bring an antitrust enforcement action against foreign states engaging in the restraint of trade regarding oil and other petroleum products.

The urgent need for this legislation has been underscored by OPEC's ongoing refusal to take effective action to decrease fuel prices, despite the fact that crude oil and gasoline prices are at historic highs. Senator Kohl and I have introduced this legislation several times, beginning back in 2000, and throughout that time period, we have examined this industry closely, and even had a hearing last year specifically looking at the causes of high gas prices. Based on our work, it is clear to me that the principal reason for current high gas prices is the fact that crude oil prices are at historic highs. This is not surprising -- crude oil makes up nearly 50% of the cost of gasoline. In fact, at last year's hearing, we heard testimony from an official at the Federal Trade Commission that changes in crude oil prices account for about 85% of the variability of the price of gasoline. And, one of the root causes of high crude oil prices is, of course, OPEC -- which sets the price of crude oil through collusion.

This bill sends an unambiguous message to OPEC nations that their price-fixing agreements, which clearly violate well-settled and internationally accepted antitrust laws, will no longer be accepted. American consumers, and businesses that depend heavily on fuel, such as our airlines, have suffered for long enough for the price-fixing decisions made on other shores. On behalf of American consumers, I urge the members of this Committee to support NOPEC.

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