The White House would be compelled to lodge a formal international trade complaint against the Organization of Petroleum Exporting Countries under a bill crafted by some House and Senate Democrats.
The White House opposes the proposed legislation. But the chances the measure even gets to US President George W. Bush's desk are seen as remote by industry lobbyists.
US Sen. Frank R. Lautenberg (D-NJ) introduced the bill, S. 2624, July 8. It would force the White House to begin proceedings before the World Trade Organization in order to stop what the lawmakers contend are OPEC's illegal oil export quotas.
Lautenberg and two of his colleagues, Sens. Richard Durbin (D-Ill.) and Carl Levin (D-Mich.), said the legislation could discourage OPEC from manipulating crude prices in the future so US gasoline costs aren't as high as they have been this summer.
Rep. Peter DeFazio (D-Ore.) will introduce companion legislation in the House.
"OPEC is an illegal cartel, plain and simple. We've allowed this cartel to operate for far too long; it's time to put an end to it," Lautenberg said. "While OPEC and their oil company allies have seen a boon, American families are paying a high price at the pump."
The legislation would require the US Trade Representative, currently Robert Zoellick, to initiate consultations with countries that are members of both OPEC and the WTO, namely Indonesia, Kuwait, Nigeria, Qatar, the UAE, and Venezuela. If consultations failed, the US would request that WTO convene a dispute settlement panel to adjudicate the case.
Lautenberg said that if the case were decided in the US's favor, OPEC would be required to cease its operations or the US would be able to impose trade remedies.
Oil analysts and international trade experts generally view the legislation as election-year political theater. Longer term, however, some analysts say it is conceivable that WTO someday could be used as a platform for producing and consuming nations to reach a mutual understanding on an equitable international oil-pricing system. But many suspect that day to be long in coming.
It also is very unlikely that under current WTO rules the kind of legal challenge advocated by Lautenberg would be sustained.
WTO offers exceptions for "conservation of national resources," for international commodities agreements, and for a nation's national security interests.
Bill sponsors argue that OPEC should not be granted an exemption because its stated goal is a price target, not conservation of resources.
With regard to commodity agreements, OPEC never has sought a formal arrangement under WTO rules, nor has it made the claim that it sets prices for national security of its member countries, the say. Instead, OPEC says it sets prices to promote economic development.
OPEC officials have not commented specifically on the legislation but often maintain their goal is to provide ample supplies at a fair and reasonable price for consumers.
Moreover, some of OPEC's key members—Iraq, Iran, and Libya—do not even belong to WTO, while Saudi Arabia is still negotiating the terms of its admission.