```

[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]

 
                  ACCOUNTABILITY FOR OPEC: H.R. 5904,
                  THE ``NO OIL PRODUCING AND EXPORTING
                             CARTELS ACT''

=======================================================================

                                HEARING

                               before the

                            SUBCOMMITTEE ON
                           REGULATORY REFORM,
                      COMMERCIAL AND ANTITRUST LAW

                                 of the

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED FIFTEENTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 18, 2018

                               __________

                           Serial No. 115-33

                               __________

         Printed for the use of the Committee on the Judiciary
         
         
         
         
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]         

      Available via the World Wide Web: http://judiciary.house.gov
      
      
      
                             _________ 

                  U.S. GOVERNMENT PUBLISHING OFFICE
                   
 31-190                  WASHINGTON : 2018            
      
      
      
                       COMMITTEE ON THE JUDICIARY

                   BOB GOODLATTE, Virginia, Chairman
F. JAMES SENSENBRENNER, Jr.,         JERROLD NADLER, New York
    Wisconsin                        ZOE LOFGREN, California
LAMAR SMITH, Texas                   SHEILA JACKSON LEE, Texas
STEVE CHABOT, Ohio                   STEVE COHEN, Tennessee
DARRELL E. ISSA, California          HENRY C. ``HANK'' JOHNSON, Jr., 
STEVE KING, Iowa                         Georgia
LOUIE GOHMERT, Texas                 THEODORE E. DEUTCH, Florida
JIM JORDAN, Ohio                     LUIS V. GUTIERREZ, Illinois
TED POE, Texas                       KAREN BASS, California
TOM MARINO, Pennsylvania             CEDRIC L. RICHMOND, Louisiana
TREY GOWDY, South Carolina           HAKEEM S. JEFFRIES, New York
RAUL LABRADOR, Idaho                 DAVID CICILLINE, Rhode Island
BLAKE FARENTHOLD, Texas              ERIC SWALWELL, California
DOUG COLLINS, Georgia                TED LIEU, California
RON DeSANTIS, Florida                JAMIE RASKIN, Maryland
KEN BUCK, Colorado                   PRAMILA JAYAPAL, Washington
JOHN RATCLIFFE, Texas                BRAD SCHNEIDER, Illinois
MARTHA ROBY, Alabama                 VALDEZ VENITA ``VAL'' DEMINGS, 
MATT GAETZ, Florida                      Florida
MIKE JOHNSON, Louisiana
ANDY BIGGS, Arizona
JOHN RUTHERFORD, Florida
KAREN HANDEL, Georgia

          Shelley Husband, Chief of Staff and General Counsel
       Perry Apelbaum, Minority Staff Director and Chief Counsel

                                 ------                                

    Subcommittee on Regulatory Reform, Commercial and Antitrust Law

                   TOM MARINO, Pennsylvania, Chairman
                 BLAKE FARENTHOLD, Texas, Vice-Chairman
DARRELL E. ISSA, California          DAVID CICILLINE, Rhode Island
DOUG COLLINS, Georgia                HENRY C. ``HANK'' JOHNSON, Jr., 
KEN BUCK, Colorado                       Georgia
JOHN RATCLIFFE, Texas                ERIC SWALWELL, California
MATT GAETZ, Florida                  BRAD SCHNEIDER, Illinois
KAREN HANDEL, Georgia                VALDEZ VENITA ``VAL'' DEMINGS, 
                                         Florida
                                         
                                         
                            C O N T E N T S

                              ----------                              

                              MAY 18, 2018
                           OPENING STATEMENTS

                                                                   Page
The Honorable Bob Goodlatte, Virginia, Chairman, Committee on the 
  Judiciary......................................................     4
The Honorable Jerrold Nadler, New York, Ranking Member, Committee 
  on the Judiciary...............................................     6
The Honorable Tom Marino, Pennsylvania, Chairman, Subcommittee on 
  Regulatory Reform, Commercial and Antitrust Law, Committee on 
  the Judiciary..................................................     8
The Honorable David Cicilline, Rhode Island, Ranking Member, 
  Subcommittee on Regulatory Reform, Commercial and Antitrust 
  Law, Committee on the Judiciary................................     3

                               WITNESSES

Mr. Seth Bloom, President and Founder, Bloom Strategic Counsel, 
  PLLC
  Oral Statement.................................................    10
Dr. Ariel Cohen, PhD, Nonresident Senior Fellow, Atlantic 
  Council's Global Energy Center
  Oral Statement.................................................    13
Mr. Phillip Brown, Specialist in Energy Policy, Congressional 
  Research Service
  Oral Statement.................................................    14
Dr. Mark Cooper, PhD, Senior Fellow, Consumer Federation of 
  America
  Oral Statement.................................................    16

              Additional Material Submitted for the Record

Statement submitted by the Honorable Jerrold Nadler, New York, 
  Ranking Member, Subcommittee on Regulatory Reform, Commercial 
  and Antitrust Law, Committee on the Judiciary. This material is 
  available at the Committee and can be accessed on the Committee 
  Repository at:

  https://docs.house.gov/meetings/JU/JU05/20180518/108326/HHRG-
    115-JU05-20180518-SD002.pdf

    ACCOUNTABILITY FOR OPEC: H.R. 5904, THE ``NO OIL PRODUCING AND 
                        EXPORTING CARTELS ACT''

                              ----------                              

                          FRIDAY, MAY 18, 2018

                        House of Representatives

    Subcommittee on Regulatory Reform, Commercial and Antitrust Law

                       Committee on the Judiciary

                            Washington, DC.

    The Subcommittee met, pursuant to call, at 9:36 a.m., in 
Room 2141, Rayburn House Office Building, Hon. Karen Handel 
presiding.
    Present: Representatives Marino, Goodlatte, Ratcliffe, 
Collins, Handel, Cicilline, Nadler, and Demings.
    Staff Present: Dan Huff, Counsel; Andrea Woodard, Clerk; 
James Park, Minority Chief Counsel, Subcommittee on the 
Constitution; Slade Bond, Minority Chief Counsel, Subcommittee 
on Regulatory Reform, Commercial and Antitrust Law; David 
Greengrass, Minority Senior Counsel; and Veronica Eligan, 
Minority Professional Staff Member.
    Ms. Handel. The Subcommittee on Regulatory Reform, 
Commercial and Antitrust Law will come to order.
    Without objection, the Chair is authorized to declare a 
recess of this Committee at any time.
    We welcome everyone to today's hearing on ``Accountability 
for OPEC: the No Oil Producing and Exporting Cartels Act.''
    And I now recognize myself for an opening statement.
    Welcome to this hearing on the No Oil Producing and 
Exporting Cartels Act, or NOPEC.
    NOPEC is a longstanding, bipartisan, bicameral bill that 
would expose the Organization of the Petroleum Exporting 
Countries, OPEC, to U.S. antitrust law for its cartel behavior 
by removing the state immunity shield available to it under 
judicial precedent.
    In previous Congresses, NOPEC has passed both the House and 
the Senate by overwhelming majorities. The bill has yet to be 
enacted into law, however, and the need for the enactment 
remains.
    The average U.S. household spends over $2,000 a year just 
on gasoline. That would be one thing if fuel prices were set by 
the free market, but they are not. Sixty percent of the total 
petroleum traded internationally is controlled by OPEC.
    OPEC was founded in 1960. It has 14 member countries, 
including Iran and Libya.
    According to the U.S. Energy Information Administration, 
production by the Organization of the Petroleum Exporting 
Countries is an important factor that affects oil prices. This 
organization seeks to actively manage oil production in its 
member countries by setting production targets.
    Historically, crude oil prices have seen increases in times 
when OPEC production targets are reduced. This collusion 
translates directly to consumers' wallets since oil prices are 
by far the most important factor in determining gas prices at 
the pump. From 2008 to 2017, crude oil costs accounted for 61 
percent of average retail price of gasoline.
    In April 2018, OPEC and non-OPEC producers, led by Russia, 
agreed to continue an agreement they struck in 2016 limiting 
production. At the time, oil was at $43 a barrel. It's now $80 
a barrel.
    In reporting on the agreement, The Wall Street Journal 
stated, ``Rising oil prices can quickly translate into higher 
pump prices, acting like a tax on American consumers, who often 
cut back in other spending areas.''
    In fact, Morgan Stanley estimates that if gas prices are 
$2.96 this year, it would take an annualized $38 billion from 
spending elsewhere. That would wipe out about a third of the 
additional take-home pay coming from the tax cuts this year.
    Given all of this, the American people would be right to 
wonder why OPEC has not been held accountable for its 
anticompetitive behavior in the oil markets. The fact is that 
over the years consumers have tried to hold it accountable but 
have failed because of essentially judge-made barriers. The No 
Oil Producing and Exporting Cartels Act removes these barriers.
    Although existing antitrust law already appears to prohibit 
foreign state actors from cooperating to limit oil production, 
NOPEC makes it explicit in the Sherman Act to remove any doubt. 
It also removes the immunity shields currently available under 
judicial precedent.
    Specifically, NOPEC makes clear that anticompetitive 
activities relating to oil production fall within the 
commercial exception to the Foreign Sovereign Immunities Act. 
The bill also provides that courts may not decline to hear an 
antitrust case relating to oil production under the act-of-
state doctrine.
    Finally, NOPEC authorizes the Department of Justice, but 
not private entities, to bring suit against oil cartel members 
in Federal court. This last provision is important because it 
ensures that courts would only be hearing cases that the 
executive branch affirmatively elected to bring after 
considering the foreign policy and national security 
implications.
    This is a bill that has always had strong bipartisan 
support, and my colleague Representative Chabot is again 
leading on this issue. We have a number of members for whom 
this topic may be new, so we have assembled an excellent panel 
to discuss the particulars.
    With the summer driving season just about upon us, I hope 
we can act swiftly, in a bipartisan way, to pass this important 
legislation that protects American consumers.
    With that, the Chair recognizes the Ranking Member of the 
Subcommittee on Regulatory Reform, Commercial and Antitrust 
Law, Mr. Cicilline of Rhode Island, for his opening statement.
    Mr. Cicilline.
    Mr. Cicilline. Thank you very much, Madam Chair, for 
holding today's hearing.
    The Judiciary Committee has a longstanding, bipartisan 
tradition of investigating and addressing anticompetitive 
conduct that harms working American families, including 
collusive behavior that artificially raises fuel prices.
    Most recently, I joined the Chairman on a bipartisan letter 
in 2017 requesting that the Federal Trade Commission 
investigate reports of price gouging of fuel, food, water, and 
other essential resources by disaster profiteers in the wake of 
Hurricane Harvey and Hurricane Irma.
    In the 110th Congress, the Judiciary Committee's Antitrust 
Task Force held two hearings on retail gas prices. At these 
hearings, witnesses testified that rising fuel prices were due 
to market manipulation, refinery capacity, crude oil supply, 
corporate oil mergers, and other factors.
    Prior bipartisan activity also includes the consideration 
and passage of the No Oil Producing and Exporting Cartels Act, 
legislation that has not yet been introduced in this Congress 
but that we will consider today.
    This bill, which passed the House and Senate with 
overwhelming bipartisan support in prior Congresses, would 
allow the Justice Department to investigate and prosecute 
anticompetitive conduct related to the production and price of 
oil by members of the Organization of the Petroleum Exporting 
Countries, OPEC, and other foreign countries.
    It would do so by clarifying that anticompetitive conduct 
by foreign nations to limit the production or set the price of 
oil and other petroleum products is not exempt under the 
Foreign Sovereign Immunities Act or relevant judicial 
doctrines.
    Since 1960, the OPEC oil cartel has colluded to control the 
supply of oil in an effort to manipulate crude oil supply. Most 
recently, 11 OPEC members announced a new agreement with 11 
non-OPEC countries, including Russia, to manipulate oil prices 
by reducing oil production. The Supreme Court has referred to 
this type of anticompetitive conduct, which would ordinarily 
violate our antitrust laws, as the supreme evil of antitrust.
    But unlike other cartel behavior, OPEC members and their 
corporate subsidiaries are free to engage in anticompetitive 
conduct due to judicial doctrines that limit the resolution of 
legal disputes against foreign countries.
    While I support the goals of the NOPEC Act, mainly giving 
the Justice Department the tools to investigate and prosecute 
anticompetitive conduct by foreign oil-producing nations, use 
of antitrust enforcement in this area must be part of a broader 
thoughtful strategy toward ensuring energy independence and 
providing for diplomatic engagement with OPEC members and other 
countries that collude to withhold oil supply.
    It is also important to note that antitrust enforcement 
alone is not a silver bullet to lowering oil prices. I firmly 
believe that addressing oil consumption, rather than oil 
production, is critical to ensuring America's energy 
independence. And that is why we must make it a national 
priority to deploy and expand our capacity for clean energy 
production, which would create tremendous economic opportunity 
for American families across the country.
    In my home State of Rhode Island, we are already hard at 
work to deliver clean energy solutions and address climate 
change.
    I am also concerned that antitrust enforcement against 
foreign nations has the potential to create serious 
geopolitical risks, such as oil embargoes and other forms of 
retaliatory conduct, while potentially lending itself to 
political interference in antitrust enforcement. I am very 
interested to hear from our witnesses whether this legislation 
could create any of these unintended consequences. We should be 
sure to take all of these possible concerns into account as we 
consider this measure.
    I would also note that authorizing the Justice Department--
or giving the Justice Department the power to enforce the 
antitrust laws against foreign oil cartels is not the same as 
compelling law enforcement in this area or pre-ordaining 
enforcement strategies at the Justice Department. Merely 
authorizing the Justice Department to investigate and prosecute 
these types of cases may be enough to discourage collusion by 
foreign oil cartels. Put another way, this legislation may give 
the executive branch a tool to speak softly and carry a big 
stick.
    In closing, I want to thank the Chair again for holding 
today's hearing. I also thank our panel of witnesses for 
participating today and look forward to hearing your testimony.
    With that, I yield back.
    Ms. Handel. Thank you.
    The Chair now recognizes the Chairman of the full Judiciary 
Committee, Mr. Goodlatte of Virginia, for his opening 
statement.
    Chairman Goodlatte. Thank you, Madam Chairman.
    The ``No Oil Producing and Exporting Cartels Act'', or 
``NOPEC'', is a bipartisan bill whose enactment is long 
overdue.
    The fact that the Organization of the Petroleum Exporting 
Countries is not being held accountable for its anticompetitive 
behavior makes a mockery of U.S. antitrust law. Consider that 
the Justice Department is currently blocking a high-profile 
merger over consumers potentially paying 50 cents more a month.
    Academics call for greater regulation to protect consumer 
welfare based on increasingly exotic antitrust theories. 
Meanwhile, nothing is done about OPEC's collusive activity, 
even though it appears illegal per se and is behind a rise in 
gas prices of over 50 cents a gallon since 2016.
    The lack of action is not a function of gaps in the 
underlying antitrust statutes. As the Supreme Court has 
explained, under the Sherman Act, a combination formed for the 
purpose of and with the effect of stabilizing the price of a 
commodity in interstate or foreign commerce is illegal per se.
    OPEC's organizational document, under the heading 
``Objectives,'' states that the organization'' shall devise 
ways and means of ensuring the stabilization of prices in 
international oil markets.''
    Federal law specifically provides that the Sherman Act 
applies to foreign conduct that has a direct, substantial, and 
reasonably foreseeable effect on U.S. domestic commerce. That 
is certainly true of oil prices. A recent Wall Street Journal 
article warned that rising prices are posing a threat to U.S. 
growth as the cost of fuel and gasoline weighs on drivers, 
airlines, delivery companies, and other big consumers.
    Unfortunately, courts have blocked efforts to hold OPEC 
accountable under these provisions.
    In 1979, a Federal district court dismissed, on the ground 
of sovereign immunity, a lawsuit against OPEC brought by a 
labor union. But the same Federal law that creates that 
immunity contains an exception for commercial activity. 
Nevertheless, the judge read that exception narrowly to avoid 
having to decide the case.
    On appeal, the Ninth Circuit did not reach the sovereign 
immunity question. Instead, it held that the suit was barred by 
the act-of-state doctrine, which is a judge-made doctrine 
designed to avoid judicial action in sensitive areas.
    These concerns were echoed in subsequent cases. In 2010, 
the Obama administration urged the Fifth Circuit to dismiss a 
case against OPEC brought by private parties on act-of-state 
and political question grounds because it is for the executive 
branch, not the courts, to determine how best to protect United 
States foreign policy and national security interests in regard 
to foreign oil-producing states.
    The NOPEC legislation under consideration fully addresses 
these concerns because it does not create a private right of 
action. It entrusts discretion on whether to bring a case 
solely to the executive branch. Courts would only be hearing 
cases that the executive branch affirmatively elected to bring 
after considering the foreign policy and national security 
implications.
    No wonder that NOPEC has enjoyed robust bipartisan support 
since it was first introduced in the 106th Congress. For 
example, the bill that is the subject of this hearing is 
identical to the version offered in both chambers in the 110th 
Congress.
    The House version was cosponsored by Representatives 
Conyers, Chabot, Lofgren, and Cohen, among others. The bill 
passed the House on suspension. Then-Speaker Pelosi lauded it 
as a critical tool, declaring that ``American consumers must 
not be at the mercy of foreign oil cartels that conspire to fix 
prices and allocate production.''
    The Senate version of the bill during the 110th Congress 
had 14 cosponsors, including Senators Grassley, Schumer, and 
Durbin. The Senate Judiciary Committee reported it favorably by 
unanimous consent.
    Despite strong support in Congress over a period of years, 
NOPEC has not yet become law. However, recently, President 
Trump signaled that he may be more receptive than prior 
Presidents to NOPEC. This creates a real opportunity to enact 
this long-overdue law.
    I look forward to hearing from our witnesses and to moving 
the bill forward.
    Thank you, Madam Chairman.
    Ms. Handel. Thank you.
    The Chair now recognizes the Ranking Member of the full 
Judiciary Committee, Mr. Nadler of New York, for his opening 
statement.
    Mr. Nadler. Thank you, Madam Chairman.
    Madam Chairman, in 2007, I voted for legislation virtually 
identical to the measure that is the subject of today's 
hearing, the No Oil Producing and Exporting Cartels Act, or 
NOPEC Act, which passed the House with overwhelming bipartisan 
support. Although 11 years have passed since then, many of the 
reasons for supporting that legislation in 2007 remain valid 
today.
    This legislation authorizes the Department of Justice to 
bring suit for anticompetitive behavior against members of the 
Organization of the Petroleum Exporting Countries, or OPEC, a 
group of 14 petroleum-producing countries whose self-described 
mission is, ``to coordinate and unify the petroleum policies of 
member countries and ensure the stabilization of oil prices and 
a fair return on capital to those investing in the petroleum 
industry.''
    Put more bluntly, OPEC is a cartel whose members 
deliberately collude to limit crude oil production as a means 
of fixing prices, unfairly driving up the price of crude oil to 
satisfy the greed of oil producers.
    Such behavior, if done by private companies, would be 
illegal per se under U.S. antitrust law. Because of a series of 
court decisions, however, U.S. antitrust enforcers are unable 
to protect American consumers and businesses from the direct 
harm caused by OPEC's blatantly anticompetitive conduct.
    Some courts have held that OPEC member countries are 
entitled to sovereign immunity in U.S. courts because 
activities surrounding the extraction of petroleum constituted 
a sovereign act rather than a commercial activity. Other courts 
ruled that the act-of-state doctrine, a judicially created 
prudential doctrine by which courts avoid review of foreign 
governments' actions and defer resolution of certain disputes 
with foreign governments to the political branches, prevented 
consideration of the case.
    The NOPEC Act directly addresses these decisions by 
amending procedural law and expressly authorizing the Justice 
Department to pursue antitrust litigation against OPEC members 
should it choose to do so.
    First, it amends the Sherman Antitrust Act to add a new 
section, 7(a), that explicitly makes it illegal for any foreign 
state to act collectively with others to limit production, fix 
prices, or otherwise restrain trade with respect to oil, 
natural gas, or other petroleum products. This provision could 
be enforced only by the Justice Department.
    The bill also creates an exemption under the Foreign 
Sovereign Immunities Act to allow litigation against foreign 
countries to the extent that they are engaged in price-fixing 
and other anticompetitive activities in violation of this new 
section 7(a).
    Finally, this legislation clarifies that the act-of-state 
doctrine does not prevent courts from deciding antitrust cases 
brought against foreign governments under the new section 7(a).
    OPEC controls more than 80 percent of global oil reserves, 
40 percent of the world's oil production, and more than 60 
percent of the petroleum that is traded internationally. When 
acting collectively, OPEC countries can greatly influence crude 
oil prices.
    Why should the average American care about this? Because 
the price of crude oil is the largest single determinant of 
retail gas prices. According to one estimate, crude oil prices 
accounted for 57 percent of the cost of retail gasoline as of 
February 2018.
    And the enhanced price of oil is a direct tax on every 
American and on every American economic unit. The retail price 
of gasoline touches almost every aspect of Americans' daily 
lives, from the cost of commuting to the price of food, and 
almost every consumer good, to the extent such prices reflect 
transportation expenses.
    High gas prices, in addition to raising these costs and 
cutting into Americans' income, can cause a vicious cycle of 
negative economic effects, such as causing consumers to cut 
back on purchases and limit their travel, which, in turn, hurts 
businesses and their employees.
    The NOPEC Act strikes an appropriate balance between 
allowing aggressive enforcement of U.S. antitrust laws against 
OPEC to keep oil prices in check and respecting the separation 
of powers by deferring to the executive branch as to whether 
litigation is appropriate in any given case in light of foreign 
policy and national security concerns.
    For a bill we last considered in 2007, one might be tempted 
to say that the concerns motivating the NOPEC Act are 
yesterday's news. In a somewhat literal sense, I agree. 
According to a CNBC report from 2 days ago, oil prices rose to 
$80 a barrel for the first time since November 2014.
    Last week, the U.S. Energy Information Administration 
estimated that U.S. regular gasoline retail prices over the 
period of April to September will rise to an average of $2.90 
per gallon, which is 17 cents per gallon higher than last month 
and up from an average of $2.41 per gallon last summer.
    That agency also reported that gasoline prices will reach a 
summer peak of $2.97 per gallon by June and that this projected 
increase is primarily the result of higher forecasted crude oil 
prices.
    For the foregoing reasons, I support reintroduction of the 
NOPEC Act. Nevertheless, I caution that it would be a mistake 
to think that enacting this legislation alone would fix the 
problem of unfair retail gas prices. Congress should explore 
the other factors that also drive high gas prices, including an 
anticompetitive level of concentration among oil refiners, our 
excessive petroleum consumption as a society, and the 
heightened risk of war and instability in the Middle East. 
Passing the NOPEC Act, however, would be a helpful step.
    I thank our witnesses for their participation, and I look 
forward to their testimony.
    And I want to add, I thank the Chairman of the Committee 
for actually holding a hearing on this bill. Even though we 
held a hearing on this back in 2007, I am glad we are holding 
another hearing now before we consider the bill in markup. So I 
thank you.
    I yield back.
    Ms. Handel. Thank you very much.
    Without objection, the opening statements of the other 
Members will be made a part of the record.
    Ms. Handel. I will now begin----
    Mr. Chabot. Madam Chair.
    Ms. Handel. Yes.
    Mr. Chabot. Would it be possible for the gentlelady to 
recognize the gentleman from Pennsylvania?
    Ms. Handel. Is there any objection?
    Mr. Cicilline. No, none.
    Ms. Handel. All right. The Chair recognizes my colleague, 
Representative Marino from Pennsylvania.
    Mr. Marino. First of all, I want to thank Congresswoman 
Handel for presiding over this hearing.
    And I yield my time to the author of this bill, Congressman 
Chabot.
    Mr. Chabot. I thank the gentleman for yielding.
    I thank the gentlelady for holding this hearing this 
morning, and I will be brief.
    And I want to thank the witnesses, who will be testifying 
when we ever stop talking. And I apologize for dragging it out 
even longer here.
    This will be the fourth time that I have introduced this 
legislation since 2000, each time when OPEC's price controls 
caused gas prices to skyrocket.
    And I would note, as the Chair of the full Committee 
mentioned, this has been bipartisan. I want to thank John 
Conyers for his support over the years, Zoe Lofgren, Steve 
Cohen, and others, my colleagues on both sides of the aisle, 
for supporting this.
    Back in my home district, in Cincinnati, Ohio, and in 
Hamilton County and Warren County, the price of gas is nearing 
$3 a gallon and continues to steadily rise. It's affecting 
people at all income levels.
    I happen to also be the Chairman of the House Small 
Business Committee. It is dramatically impacting small 
businesses and their employees all over the country. And as the 
price of gas continues to go up, it is more expensive to ship 
their products around. Most of these small businesses have a 
very razor-thin bottom line, and it is affecting people all 
over the country.
    There is really no excuse for what the oil cartels have 
gotten away with over the years. Sovereign immunity has 
basically protected them. This legislation, although it doesn't 
solve the whole problem, goes a long way in at least handling a 
significant part of the problem.
    So I would encourage my colleagues on both sides of the 
aisle to support it. And I thank the gentleman from 
Pennsylvania, and I yield back.
    Mr. Marino. I yield back.
    Mr. Nadler. Madam Chairperson.
    Ms. Handel. Yes.
    Mr. Nadler. I would like to ask unanimous consent to insert 
into the record the letter from Senator Kohl in support of the 
bill.
    Ms. Handel. Without objection.
    This material is available at the Committee or on the 
Committee Repository at: https://docs.house.gov/meetings/JU/
JU05/20180518/108326/HHRG-115-JU05-20180518-SD002.pdf.
    Mr. Nadler. Thank you.
    Ms. Handel. I will now begin by swearing in our witnesses 
before introducing them.
    If you would, please all rise. Raise your right hand.
    Do you swear that the testimony you are about to give 
before this Committee is the truth, the whole truth, and 
nothing but the truth, so help you God?
    Great. Thank you so much.
    Let the record reflect that all of the witnesses responded 
in the affirmative.
    Thank you.
    Our first witness, Seth Bloom, is the president of Bloom 
Strategic Counsel, a Washington, D.C., law firm specializing in 
antitrust law and competition policy.
    Prior to founding his firm in 2013, Mr. Bloom spent nearly 
14 years as a counsel on the staff of the Senate Antitrust 
Subcommittee, from 1999 until January 2013, the last 4 years of 
which as general counsel. He worked for Senator Herb Kohl, who 
was the first Ranking Member and then Chairman of the 
Subcommittee. He was the lead staffer on the NOPEC legislation 
and drafted the bill before it was introduced in 2000.
    Mr. Bloom also served as a trial attorney in the Justice 
Department's Antitrust Division from 1996 to 1999. He holds a 
J.D. from the University of Pennsylvania Law School and a B.A. 
from the University of Rochester.
    Thank you for being here.
    I'm going to introduce everybody, and then we'll come back.
    Our second witness, Ariel Cohen, is a senior fellow at the 
Atlantic Council. Dr. Cohen is also the founder and director of 
the Center for Energy, Natural Resources, and Geopolitics and a 
senior fellow at the Institute for Analysis of Global Security. 
His particular expertise lies in political risk, national 
security, energy policy, and he is geographically focused on 
Russia, Eurasia, Central and Eastern Europe, and the Middle 
East.
    He frequently advises both the executive branch and the 
private sector on oil, gas, coal, and nuclear energy in 
Eurasia, Eastern and Central Europe, and the Middle East. He 
has testified regularly before Congress and has appeared on 
Bloomberg, CNN, Fox, CBC, Al Jazeera, and many other TV 
channels.
    Dr. Cohen was previously senior research fellow in 
international energy security with The Heritage Foundation. He 
earned his M.A. in law and diplomacy and a doctorate at the 
Fletcher School of Law and Diplomacy.
    Dr. Cohen, thank you for joining us.
    Phillip Brown is a specialist in energy policy at the 
Congressional Research Service, or CRS. In support of the U.S. 
Congress, Mr. Brown provides research and analysis in existing 
and proposed Federal energy policies.
    Mr. Brown's current portfolio of work is focused on oil 
markets and U.S. crude oil exports, clean energy policies, 
renewable electric power, and financial mechanisms that may be 
used to incentivize renewable electricity project developments.
    Mr. Brown also actively monitors world energy markets in 
order to provide congressional clients with a global 
perspective of the effectiveness of various energy policy 
mechanisms.
    Prior to joining CRS, Mr. Brown held various marketing, 
business development, and executive positions at companies 
ranging in size from a new startup venture in Diversified 
Energy Corporation to Fortune 500 companies such as Northrop 
Grumman and General Dynamics.
    Thank you for being here.
    Our fourth and last but not least witness, Dr. Mark Cooper, 
is the director of research at the Consumer Federation of 
America, where he has responsibility for energy, 
telecommunications, and economic policy analysis.
    Dr. Cooper is a fellow at the Stanford Law School Center 
for Internet and Society, an associate fellow at the Columbia 
University Institute on Tele-Information, and a fellow at the 
Donald McGannon Communications Center of Fordham University.
    He is the author of five books and has published numerous 
articles in trade and scholarly journals, including recent Law 
Review articles on telecommunications and digital society 
issues.
    Dr. Cooper has provided expert testimony in over 250 cases 
for public interest clients, including attorneys general, 
people's counsel, and citizen interveners, before State and 
Federal agencies, courts, and legislators in almost four dozen 
jurisdictions in the United States and Canada.
    He holds a Ph.D. from Yale University and is a former Yale 
University and Fulbright fellow.
    Thank you all for being here.
    Each of the witnesses' written statements will be entered 
into the record in its entirety. I ask that each witness 
summarize your testimony in 5 minutes or less. To help you stay 
within that time--we walked through this before--there is a 
timing light in front of each of you. The light will turn on 
for 5 minutes green and then move to yellow, indicating that 
you have about 1 minute to conclude your remarks. And when the 
light turns red, it indicates that it's time to wrap up.
    We'll start with Mr. Bloom.

TESTIMONY OF SETH BLOOM, PRESIDENT AND FOUNDER, BLOOM STRATEGIC 
 COUNSEL, PLLC; ARIEL COHEN, PH.D., NONRESIDENT SENIOR FELLOW, 
    ATLANTIC COUNCIL'S GLOBAL ENERGY CENTER; PHILLIP BROWN, 
 SPECIALIST IN ENERGY POLICY, CONGRESSIONAL RESEARCH SERVICE; 
 AND MARK COOPER, PH.D., SENIOR FELLOW, CONSUMER FEDERATION OF 
                            AMERICA

                    TESTIMONY OF SETH BLOOM

    Mr. Bloom. Thank you.
    Chairwoman Handel, Ranking Member Cicilline, and 
distinguished Members of the Subcommittee, thank you for 
inviting me to testify on this important topic today.
    From 1999 to January 2013, I served as counsel on the 
Senate Judiciary Committee's Antitrust Subcommittee, the last 4 
years as the Subcommittee's general counsel. I am now an 
attorney in private practice, specializing in antitrust law and 
competition policy. And I want to stress at the outset that 
none of my clients have any interest in the issues I will 
discuss today. My testimony today is entirely my own.
    One of our most important legislative initiatives during 
the time I worked for the Senate Antitrust Subcommittee was a 
bill we named the No Oil Producing and Exporting Cartels Act, 
or NOPEC.
    NOPEC is a very short bill that I believe would have a very 
large effect if enacted. NOPEC would make illegal under U.S. 
antitrust law the activities of foreign nations who participate 
in oil cartels designed to limit the supply or raise the price 
of oil imported into the U.S.
    It would amend the Sherman Act, our Nation's basic 
antitrust law, to simply and clearly state that it would be 
illegal for any foreign state or instrumentality or agent of 
any foreign state to take joint action to limit the production 
of or set or maintain the price of oil or any other petroleum 
product when such collective action has a direct, substantial, 
and reasonably foreseeable effect in the United States.
    NOPEC was first introduced in June 2000 by Senator Kohl and 
nine bipartisan cosponsors and was passed unanimously out of 
the Senate Judiciary Committee that year. Senator Kohl would 
introduce the NOPEC legislation with a large list of bipartisan 
cosponsors in every remaining Congress in which he served, a 
total of six more times. And it passed out of the Senate 
Judiciary Committee in each Congress, except for one, with a 
unanimous vote each time.
    Companion legislation was introduced here in the House by 
Representative Chabot and several bipartisan colleagues on 
several occasions.
    In 2007, the NOPEC bill passed with overwhelming majorities 
on both the House and Senate floors, with 70 votes in the 
Senate and 345 votes in the House, but in different legislative 
vehicles. The two measures were never reconciled.
    I was very encouraged to learn the Subcommittee was holding 
this hearing today and that several Members of the Subcommittee 
were considering reintroducing this legislation. The need for 
this NOPEC legislation is very much as real today as it was 
when Senator Kohl first introduced it in the year 2000. Indeed, 
Senator Kohl sent a letter to the Subcommittee 3 days ago 
strongly supporting the reintroduction of NOPEC.
    The OPEC oil cartel, a selfish conspiracy of 14 oil-
producing nations, today continues its decades-long effort to 
limit the supply and therefore inflate the worldwide price of 
oil.
    In November 2016, OPEC announced that 11 member nations 
would cut supply by a collective 425 million barrels in 2017, a 
cut of about 4.6 percent for each nation. A month later, 11 
non-OPEC-member nations, led by Russia, announced that they, 
too, had agreed to the production cutback agreement.
    So the menace of the oil cartel is growing today, and these 
supply cuts have worked. The price of Brent crude oil rose 
about $10 a barrel during 2017. Indeed, these supply cuts have 
worked so well in OPEC and other nations' views that in 
November 2017 these 22 nations agreed to extend the supply cuts 
throughout 2018. And oil prices continue to rise.
    The FTC has estimated that 85 percent of the variability of 
the price of gasoline is caused by the change in the price of 
crude oil. So millions of American consumers feel the effect of 
the OPEC conspiracy every time they visit the gas pump.
    Such blatantly anticompetitive conduct by the member 
nations of the oil cartel to fix the price of oil by limiting 
supply violates the most basic principles of free markets and 
fair competition and should not be tolerated.
    As the Supreme Court stated in 2004, cartels are, ``the 
supreme evil of antitrust.''. Because the law of supply and 
demand establishes that an agreement to limit output is 
tantamount to an agreement to fix price, courts have held as 
per se illegal agreements to limit supply, limit production, or 
set quotas, just as agreements to fix price.
    As Senator Kohl stated in the Senate Judiciary Committee's 
hearing on the NOPEC bill in 2007, ``If the members of OPEC 
were private companies and not nations, they long ago would 
have been prosecuted for engaging in illegal price fixing.''
    But the OPEC member nations and their allies hide behind 
the doctrines of sovereign immunity and act of state to claim 
immunity from antitrust prosecution for their illegal price-
fixing cartel. So the solution is simple: legislatively 
eliminate these protections for members of the oil cartel.
    The sovereign immunity statute already contains an 
exception for commercial activity of nations. And what could be 
more commercial than the sale of oil for profit?
    Despite this, a mistaken 1979 decision of a Federal 
district court in California, in the International Association 
of Machinists case, ruled that OPEC and its member nations were 
immune from antitrust scrutiny. Congress should overturn this 
precedent by passing legislation that makes clear that nations 
that engage in oil cartels will not gain the benefits of 
sovereign immunity.
    Likewise, the legislation should make clear that the act-
of-state doctrine cannot protect from antitrust liability 
nations that participate in oil cartels.
    When I was counsel to the Senate Antitrust Subcommittee, I 
was frequently asked what difference the enactment of NOPEC 
would make. In my judgment, enactment of such a statute can 
make a real difference in restraining the anticompetitive 
actions of the oil cartel.
    First, many OPEC member nations and their new allies have 
extensive assets and bank holdings in the United States. Should 
the Justice Department file suit under NOPEC and win, the U.S. 
could seize those assets.
    Second, the mere threat of bringing lawsuits under NOPEC 
will give the U.S. an important tool to employ in negotiations 
with the oil cartel. This threat will likely restrain the oil 
cartel as it considers production cutbacks.
    Enactment of the NOPEC legislation would, for the first 
time, enable our Justice Department to take strong legal action 
to combat the illegal price-fixing activities of the oil 
cartel.
    I commend the Subcommittee for holding this hearing today 
and for considering this important piece of legislation. Thank 
you.
    Mr. Bloom's written statement is available at the Committee 
or on the Committee Repository at: https://docs.house.gov/
meetings/JU/JU05/20180518/108326/HHRG-115-JU05-Wstate-BloomS-
20180518.pdf.
    Ms. Handel. Thank you.
    Dr. Cohen, you are now recognized.

                TESTIMONY OF ARIEL COHEN, PH.D.

    Mr. Cohen. Chairman Handel, Ranking Member Cicilline, and 
honorable Members of the Subcommittee, thank you for inviting 
me today. I raised my voice in support of this legislation back 
in 2007, and I am doing it again.
    My name is Ariel Cohen. I'm a senior fellow at the Atlantic 
Council, nonresident. The views expressed here are mine alone, 
and I am grateful for the opportunity.
    The monopolization of state resources by powerful entities 
is a phenomenon as old as trade itself. From China's infamous 
Salt Commission in 758 A.D. to Standard Oil and U.S. Steel in 
the turn of the 20th century, history is replete with 
cautionary tales of distorted commodities markets and their 
deleterious effects on populations and on commerce. More than 
mere market failures, however, the concentrated control of 
basic necessities is a threat to our own way of life.
    Oil today, much like salt in ancient China or steel in 
1900, is a strategic resource with no large-scale substitute 
yet, until electric propulsion and fuel choice replaces the 
current dependence on jet fuel, gasoline, and diesel fuel. 
Given that oil is the lifeblood of the international trade 
system, the United States and global community at large can no 
longer afford to leave this critical market vulnerable to 
manipulation.
    The problem today that we are facing is that OPEC is 
expanding. The Vienna Group is adding numerous countries. I 
have a list here: Kazakhstan, Azerbaijan, Oman, Mexico, Sudan, 
South Sudan, Malaysia, et cetera--very few of them democracies, 
such as OPEC itself. There are very few countries in OPEC which 
are democracies, and a number of countries that are strongly 
anti-American: Russia, Iran, Iraq, Venezuela, and Ecuador.
    In the second half of 2014, oil prices crashed, the 
combined result of weak global economic growth and an influx of 
supply from U.S. shale. The world looked to OPEC to correct 
massive downturn, which saw prices slide from over $110 per 
barrel in June of 2014 to $50 by January 2015, in 6 months.
    Rather than pulling back supply to stabilize prices, OPEC 
opted to maintain production levels in an effort to snuff out 
North America's fledgling shale industry. The results were 
disastrous. Prices fell to below $30 a barrel by January 2016. 
Investment in the energy sector collapsed, spilling over into 
other commodities and roiling the global banking sector.
    While low oil prices are in many ways beneficial to the 
U.S. economy, the rapidity of a price drop, amplified by OPEC 
and its allies in an effort to protect market share against 
American competition, deepened the global recession.
    Today, we are subjected to a more familiar, possibly more 
dangerous form of OPEC market manipulation: coordinated supply 
cuts. This kind of weaponization of the flow of supply was 
carried out in the 1973 Arab oil embargo after the Yom Kippur 
War and in 1979 in the second oil crisis connected to the Iran-
Iraq War. OPEC did not step in, did not correct the price, and, 
as a result, a global economic recession from 1974 till 1980s 
ensued.
    So, right now, OPEC cuts eliminated 1.8 million barrels per 
day from circulation--2 percent of global supply. And the OPEC 
member and non-member-state alliance, the Vienna Group, has a 
compliance of 163 percent with the targeted cuts. So they are 
doing their best, above and beyond the planned cuts, to drive 
the prices up.
    Some concerns were raised, what will happen if the Trump 
administration abandons JCPOA, and what will happen if the 
Iranian supply will decrease. And the answer is, among the 
experts, the meetings I attend, we are talking about 250,000 to 
500,000 shortage--500,000-barrels-a-day shortage. That amount 
would be easily filled by U.S. shale, by Saudi Arabia that has 
an interest in sanctions on Iran, and most probably by Russia 
and other countries of the former Soviet Union that are 
minimally complying with these sanctions.
    As a former Chairman of the Fed Janet Yellen described in 
2011, ``Higher prices lower American income overall because the 
United States is a major oil consumer. The increasing price of 
crude acts as a tax on the U.S. household and tends to have a 
dampening effect on consumer spending.''
    To conclude, the United States can no longer allow OPEC and 
its allies to operate with immunity from sensible antitrust 
legislation. The consequence of one group controlling 40 
percent of world oil production and, with their allies, 55 
percent and 80 percent of proven reserves are too menacing to 
ignore.
    Ms. Handel. If we can wrap up, Dr. Cohen.
    Mr. Cohen. The geopolitical outcome hurts U.S. interests 
and our allies. Hydrocarbon revenues are the primary source 
income for some of America's chief global adversaries. I----
    Ms. Handel. Thank you.
    Mr. Cohen [continuing]. Mentioned Russia and----
    Ms. Handel. Thank you very much. Thank you.
    Mr. Cohen's written statement is available at the Committee 
or on the Committee Repository at: https://docs.house.gov/
meetings/JU/JU05/20180518/108326/HHRG-115-JU05-Wstate-CohenA-
20180518.pdf.
    Ms. Handel. Mr. Brown, you are now recognized.

                   TESTIMONY OF PHILLIP BROWN

    Mr. Brown. Chairwoman Handel, Ranking Member Cicilline, 
Members of the Committee, good morning. My name is Phillip 
Brown. I am a specialist in energy policy at the Congressional 
Research Service.
    CRS appreciates the opportunity to testify about the No Oil 
Producing and Exporting Cartels Act. And the focus of my 
testimony today is about recent oil market interventions by the 
Organization of the Petroleum Exporting Countries, or OPEC.
    Issues related to international law are beyond the scope of 
my testimony. Additionally, in accordance with our enabling 
statutes, CRS takes no position on this or other legislation.
    Benchmark oil prices are a function of fundamental factors 
such as demand, supply, and inventories. However, prices can 
also be affected by geopolitical risks, unplanned outages, and 
spare production capacity in the market.
    Today, OPEC influences the oil market through its role as a 
supply manager. Ordinarily, the organization holds two meetings 
a year to discuss oil market conditions and make decisions 
about member country production levels. Historically, Saudi 
Arabia has played the primary swing producer role. Decisions 
that affect oil production can have a direct impact on oil and 
petroleum product prices.
    In 2014, following 3 years of relatively stable prices in 
the range of $100 to $125 per barrel, supply and demand 
balances indicated that the market was becoming oversupplied. 
Much of the oversupply at that time was due to rapid growth in 
U.S. oil production. By the November 2014 OPEC meeting prices 
had fallen below $80 per barrel. There was some expectation 
that OPEC would reduce production in order to address the 
oversupply situation. However, OPEC decided to maintain its 
production levels, and prices declined rapidly. OPEC meetings 
in 2015 had similar outcomes, and prices fell to as low as $26.
    OPEC's nonintervention was perceived by some as a targeted 
effort to disadvantage U.S. oil producers. From 2015 to July 
2016, U.S. oil production declined by a million barrels per 
day.
    Subsequently, H.R. 4559 was introduced in the 114th 
Congress. This bill sought to create a commission to 
investigate OPEC practices deemed to be anticompetitive, 
including those that disadvantaged U.S. oil producers. An 
identical bill, H.R. 545, has been introduced in the 115th 
Congress.
    Oil prices started to recover in 2016, and OPEC began 
laying the foundation for a market intervention that would 
address global oversupply and record-level inventories.
    In November 2016, OPEC announced that 11 of the 13 then-
active member countries--Libya and Nigeria were exempt; and, 
also under the agreement, Iran was actually allowed an increase 
in production--had reached an agreement to reduce production by 
approximately 1.2 million barrels per day.
    In December 2016, OPEC announced that 11 non-OPEC 
countries, led by Russia, had agreed to join the agreement, and 
these countries collectively committed to reduce oil production 
by an additional 560,000 barrels per day. This 22-country 
agreement went into effect in January of 2017 and is currently 
scheduled to expire at the end of December 2018.
    Compliance at the group level has exceeded the commitment, 
and the group has collectively reduced crude oil production by 
approximately 1.9 million barrels per day since the agreement 
took effect. As a result, crude oil and product storage levels 
have declined, and the International Energy Agency reports that 
inventories have returned to the 5-year average.
    Benchmark crude oil prices have subsequently increased and 
are up nearly $25 per barrel since the agreement went into 
effect. And the spot price of Brent crude oil reached $80 
yesterday. However, demand growth and geopolitical risk have 
also contributed to the price escalation.
    First introduced in 2000, a version of the NOPEC bill was 
introduced during each Congress from the 106th to the 112th. 
The House passed one such bill in 2007. These bills would have 
modified the Sherman Act, making it illegal for any foreign 
state to engage in collective activity to limit oil production 
and trade and therefore influence prices.
    Research suggests that the existence of a supply manager in 
the oil market can support stable prices. The relatively long 
investment and development cycle for the majority of global oil 
production assets and the need for such stable price signals 
have been central justifications for the existence of a global 
oil supply manager.
    Without a supply manager, it has been suggested that the 
oil market may enter a period of extreme price volatility. 
Others, however, suggest that the functioning of an oil futures 
market, along with the growth of price-responsive U.S. tight 
oil, could provide a degree of price stability without the 
existence of a supply manager.
    Thank you for the opportunity to testify today. I look 
forward to answering any questions from Members of the 
Committee.
    Mr. Brown's written statement is available at the Committee 
or on the Committee Repository at: https://docs.house.gov/
meetings/JU/JU05/20180518/108326/HHRG-115-JU05-Wstate-BrownP-
0180518.pdf.
    Ms. Handel. So far, Mr. Brown, you are witness number one 
in following the rules. Thank you.
    Dr. Cooper, you are recognized.

                TESTIMONY OF MARK COOPER, PH.D.

    Mr. Cooper. Madam Chairwoman, Members of the Committee, my 
remarks today do represent the opinion of the Consumer 
Federation of America.
    In his State of the Union address in 2006, George Bush, a 
Republican oilman, declared that America is addicted to oil. 
Prices were extremely high, and policymakers focused a great 
deal of attention on how to respond.
    One idea that always comes up at moments like this is 
NOPEC, a law that would enable the Department of Justice to sue 
the members of the oil cartel, break their ability to 
administer prices, and stop the drain of hundreds of billions 
of dollars of monopoly rents out of our economy.
    If the members of OPEC were companies, our antitrust laws 
would have put a stop to this illegal administration of prices 
half a century ago. But they are not companies; they are 
sovereign nations. And that complicates things.
    More importantly, in the long term, the tendency for 
consumption to increase with population and economic growth 
interacts with the extremely concentrated nature of low-cost 
resources in the world so that, over time, the same oil-
producing nations would find it in their interest and ability--
classic antitrust terms--to drive the price up without 
administering it. It's called conscious parallelism, and it's 
really hard to prove in the courts.
    The right answer was obvious to Congress when they passed 
the Energy Independence and Security Act of 2007. Note the 
year. Where NOPEC almost got to the finish line, EISA did get 
to the finish line.
    You do not fight an addiction by increasing the supply of 
the drug. You fight an addiction by kicking the habit. There is 
certainly some benefit to increasing our ability to supply our 
own needs in the short term, but that does not solve the 
problem. And our ability to do so will remain limited until we 
reduce the consumption of oil in the U.S. and globally 
dramatically.
    The single most important part of EISA was to reboot the 
fuel-economy standards, setting the goal of dramatically 
slashing oil consumption by reforming the approach, and also by 
making a firm commitment to achieve maximum technically 
feasible and economically practical reductions.
    After 10 years of building an effective, comprehensive, 
cooperative Federal and State program, of course the current 
administration has decided not only to stop progress but to 
tear the structure apart.
    Our analysis of the national program shows it has a 
positive benefit-cost ratio of six to one, at a break-even cost 
of 75 cents a gallon. Rolling the standards back would cost the 
average household about $4,500, and the total of $350 billion 
of savings that would be foregone would only save automakers 
$50 billion. That's a negative benefit-cost ratio of minus six 
to one.
    Therefore, in our opinion, the act violates not only the 
Administrative Procedure Act--because they haven't built the 
record--but it violates the underlying energy statutes. I don't 
believe they could ever build the record to support their 
action because EPA, NHTSA, and the California Air Resources 
Board have, in fact, identified market failures and explained 
why performance standards work well.
    Of utmost importance, this program is what I call command 
but not control. It is long-term, product-neutral, technology-
neutral, responsive to industry needs, responsive to consumer 
needs, and pro-competitive. It tells them, yes, you have to 
meet a standard, but it lets the automakers do it the way they 
can best. And you know what? They are good capitalists. They 
will do it in the least-cost manner possible. This is a good 
command-but-not-control standard.
    And we have seen it for 10 years. Efficiency is increasing. 
The cost of efficiency has been coming down. The automobile 
industry has been doing fine. And that is exactly what EISA 
intended.
    So NOPEC would be fine, but if it detracts at all from the 
commitment to reducing consumption, in the long term it could 
do more harm than good.
    By scrapping the standards and preventing the clean car 
States from sticking to them, the current administration has 
decided to feed the oil habit rather than to kick it. This will 
increase U.S. consumption by trillions of gallons over the next 
couple of decades, pointing the world in the wrong direction. 
Now, automakers and oil companies will profit, but consumers, 
the economy, national security, and the environment will 
suffer.
    Thank you.
    Mr. Cooper's written statement is available at the 
Committee or on the Committee Repository at: https://
docs.house.gov/meetings/JU/JU05/20180518/108326/HHRG-115-JU05-
Wstate-CooperM-20180518.pdf.
    Ms. Handel. Thank you very much to all of our witnesses.
    We're now going to enter into the portion of our hearing 
where the Members of the Subcommittee have an opportunity to 
ask questions.
    I'm going to hold on, myself. I'd like to first recognize 
Representative Marino from Pennsylvania, the Chair of this 
Subcommittee, for his 5 minutes.
    You are now recognized.
    Mr. Marino. Thank you, Madam Chair.
    Thank you for being here.
    I'm going to get right to the point. After the big three 
raised their prices, all gas stations that I have seen--and I 
travel across this country--the prices go up all at once. And 
they blame it on issues in the Middle East, but that's unclear. 
But when those issues go away, the price never comes down.
    The U.S. is self-sufficient in oil production and natural 
gas production, yet we export a great deal of oil. Saudi 
Arabia, we spend $61 million per day on buying oil from them. 
Iraq, who owes us money for the war, we spend $24 million per 
day paying them. Venezuela, who doesn't even like us, we end up 
paying them $44 million per day.
    Angola, Kuwait, Libya, UAE, Qatar, other countries that 
aren't crazy about us, we send them over $93 billion a day. And 
the totals--excuse me--$254.2 million a day among those five 
countries. And over the year, with all these combined, it's 
about $93 billion.
    Why is that? We are self-sufficient in oil. Why are we 
exporting oil and buying oil from many countries that don't 
even like us?
    Mr. Bloom and then Dr. Cohen, please.
    Mr. Bloom. Thank you for the question, Congressman.
    Well, that gets at a question of energy policy, which is 
beyond my expertise as an antitrust lawyer. But I will say 
this. As long as we tolerate the OPEC oil cartel and now the 11 
additional nations that have agreed to cooperate with it, that 
worldwide price of oil is going to increase. So the problem you 
identify is getting worse. The dollars we are going to be 
spending from those countries is going to be higher. And that 
is why I believe we really need to have the ability to take 
action against the oil cartel.
    Mr. Marino. What do you recommend?
    Mr. Bloom. Well, I recommend passage of this legislation. I 
recommend a true fair and free market for oil.
    You know, whether or not we want to export our oil or not, 
that's a question of energy policy. And I know there's 
arguments on both sides of that question. But without having to 
resolve that today, one thing that I think we should all be 
able to agree on is that we shouldn't tolerate this 
anticompetitive conspiracy which artificially inflates the 
price of oil.
    Mr. Cohen. Let me second that, in terms of my learned 
colleague's view that we need to pass NOPEC.
    But to the point you raise, sir, the U.S. was based on free 
trade. All oil is not created equal. Different refineries are 
calibrated for different types of oil. So we may be generating 
oil, light sweet crude, that is exported to a refinery, let's 
say, in Europe, and we may be importing heavy oil that our 
refineries in the Gulf Coast are calibrated to process.
    So the market in oil does not subvert our oil economy----
    Mr. Marino. We haven't built a refinery in how many 
decades?
    Mr. Cohen. That is a regulatory policy issue that, as my 
colleague said, is not the subject of this hearing.
    But what I will tell you is that we are consuming, if I 
remember correctly, 19 million barrels a day. We are consuming 
close to a quarter of global produced oil. The only country 
that consumes more oil than us is China. And we are not 
producing as much oil.
    So when you're saying we're self-sufficient, we're self-
sufficient maybe in hydrocarbons in general or in production of 
electricity in general, but we're not self-sufficient in 
production of crude, and that's why we're importing it.
    Mr. Marino. And it doesn't mean we cannot be self-
sufficient. We can put a man on the moon and transplant a 
heart. We certainly can take care of this issue. Would you not 
agree?
    Mr. Cohen. Can you repeat, please?
    Mr. Marino. You're saying we're not self-sufficient, but we 
could be self-sufficient if we built the infrastructure and we 
put the primary focus on not importing oil. We can put a man on 
the moon, and we can transplant a heart. I pretty much believe 
that we can do anything.
    Mr. Cohen. Congressman, oil production is a complex 
combination of the price of production, of environmental 
regulations, and of supply and of demand.
    Mr. Marino. And that gets to another issue for another day 
on the deregulation that we have to do. I'm a conservationist, 
but the regulation is killing us.
    And, unfortunately, my time's up. I yield back. Thank you.
    Ms. Handel. Thank you.
    Mr. Cohen. So let me just add----
    Ms. Handel. One sentence.
    Mr. Cohen [continuing]. To the question. Yes.
    We do not build nuclear reactors. Our nuclear industry is 
in shambles. As the Congressman said, we're not building 
refineries. We should ask ourselves a question, how we can----
    Ms. Handel. Thank you.
    Mr. Cohen. Yes.
    Ms. Handel. Got it.
    I'd like to now recognize the Ranking Member of the 
Subcommittee, Representative Cicilline.
    Mr. Cicilline. Thank you, Madam Chair.
    I think Mr. Marino is right. We can become energy-
independent and have the kind of man-on-the-moon approach with 
a very significant investment in renewable energies and new 
technologies.
    And I think, Dr. Cooper, that was your argument, that if 
we're really serious about energy independence, we still rely 
on imports of crude oil significantly, and America could lead 
the world in the development of new technologies, renewable 
energy, and become not only energy-independent but the leader 
in the world in producing that kind of energy. I think that was 
your point, Dr. Cooper.
    Mr. Cooper. We can be self-sufficient if we all get into 
electric cars, because we don't generate electricity with oil. 
And we don't need nuclear reactors. We have immense resources 
in wind and solar. Separate question.
    But the interesting thing here is that--the point made is 
that oil is a fungible commodity. There is a price set in the 
world. The problem is that the cartel prices against the 
residual demand. They are a cartel, and Nobel Prize to John 
Nash about discovering why, how that happened.
    So you're in a situation where, ultimately, you have to 
solve this problem on the demand side. That's all there is to 
it.
    Mr. Cicilline. Thank you.
    Mr. Brown, your very last sentence of your testimony, you 
said some people believe that a supply manager is the way to 
ensure--I don't--you gave, sort of, two contrasting views. Do 
you remember what you said?
    Mr. Brown. Yes. There's been some recent research in the 
oil community that suggests that, historically, when a supply 
manager exists in the marketplace, there have been long periods 
of very stable prices. We saw this primarily with the Texas 
Railroad Commission between 1930 and 1970, 1935 to 1970, along 
with international oil companies that were controlling global, 
nondomestic supply.
    The contrast of that is that things in the market have 
changed, and tight oil development in the United States is a 
very price-responsive, short-cycle developments resource of 
supply. And it's uncertain if that could be a moderating effect 
for the global market.
    Mr. Cicilline. And while I think that analysis found 
stability, it also, I think, would be fair to say inflated 
prices as a result of that management. In other words, you're 
trading off some stability for consumers paying more for the 
finished product.
    Mr. Brown. That's correct. There would be periods during 
the non-supply-managed eras that would have lower prices but 
then other periods that would have much higher prices. So 
there's a high degree of variability.
    Mr. Cicilline. Are there--and this is really for any of the 
panelists. Are there any issues that we should be concerned 
about, assuming we were to pass this legislation, in terms of 
what any of the OPEC countries might be in a position to do in 
terms of retaliation?
    We struggled with this yesterday in my office, thinking, 
are there any markets or products that the U.S. produces and 
sells that they would have the ability to take some sort of 
retaliatory action?
    Mr. Bloom, I don't know if you have some thoughts on that.
    Mr. Bloom. Thank you. Yeah, I mean, this is an argument 
that's often raised against NOPEC. I would make several points 
about it.
    Number one, retaliation. I mean, many of these nations, 
small nations, like South Sudan, or you could name the nations 
on the list--I guess South Sudan's a nation that wasn't part of 
OPEC, but it's part of this recent cooperation agreement. I 
believe they need to sell oil to us. That's essential to their 
economy. That's the one export that they have. To think that 
they would cut off the United States, a major purchaser of oil, 
as Chairman Marino listed the amounts of money that we spend, I 
think, is not realistic.
    Finally, I mean, there are other items of legislation that 
are similar to this. For example, there already is a commercial 
exemption to the Federal Sovereign Immunities Act, so 
commercial activity of states today are not exempt from 
sovereign immunity, and yet we don't see retaliation.
    In addition, Congress has passed, in the last decade, laws 
against state sponsors of terrorism and allowing victims of 
terrorism to go after a nation's assets in the United States. 
This hasn't led to a worldwide rise in retaliation. So I just 
don't accept that argument.
    Mr. Cicilline. Yes. Dr. Cohen and then Dr. Cooper.
    Mr. Cohen. On this subject, we have countries that are 
geopolitically oriented against us regardless of what's 
happening in this particular matter.
    In my view, under the current leadership, Saudi Arabia will 
remain an ally because Saudis perceive Iran as an existential 
threat. On the other hand, Venezuela, Russia, and Iran will 
continue to remain adversaries regardless of what the Congress 
is doing.
    Mr. Cicilline. Thank you.
    Dr. Cooper.
    Mr. Cooper. One-third of our economy is tied up in world 
trade. We don't realize that, and now we're slowly realizing it 
because we've decided to step back from free trade and do other 
things, and we've discovered it's really hard, because we're so 
dependent on trade.
    And so the geopolitics will always get in your way. The key 
here is to get the market fundamentals right. And the only way 
to do that, I think, is to reduce OPEC's share of the world oil 
market by reducing our demand.
    Mr. Cicilline. Thank you very much.
    Thank you, Madam Chair. I yield back.
    Ms. Handel. Thank you.
    I will now do my questioning.
    You know, I actually agree that it's an appropriate goal to 
work towards self-sufficiency. That's obviously an appropriate 
goal. Yet we still have the issues that we have today, which 
means that we need to address and deal with the OPEC situation.
    So I'd like to come to you, Mr. Bloom. How do you respond 
to the critics who argue that NOPEC sets a dangerous precedent 
in eliminating sovereign immunity?
    Mr. Bloom. I don't agree with that, as I just said in 
responding to Ranking Member Cicilline's question. There's no 
dangerous precedent. There's already a commercial exemption for 
sovereign immunity.
    And sovereign immunity is statutory. For there to be other 
attempts to withdraw sovereign immunity, it would have to pass 
an act of Congress.
    And so I don't--you know, this is a unique situation we 
have with the oil cartel. I don't see any dangerous precedent.
    Ms. Handel. All right. Thank you.
    Second question. This legislation has received strong, 
bipartisan support in the past. Can you think of any good 
reason to be less supportive this time around than previous?
    Mr. Bloom and then Dr. Cohen.
    Mr. Bloom. No, I can't. You know, in fact, as I said in my 
statement, I think the menace of the oil cartel is growing. We 
now see 11 additional nations adjoining the 11 nations of OPEC 
that agreed to the supply cutbacks. You know, if we let this 
kind of action go unchallenged, it just grows in the world.
    And so, in fact, I don't think there's any reason why it 
shouldn't be bipartisan. I've really been heartened in the past 
that it has been bipartisan. But I think the need for this 
legislation has grown today.
    Ms. Handel. Thank you.
    I'll now yield the remainder of my time to my colleague, 
Representative Chabot from Ohio.
    Mr. Chabot. I thank the gentlelady very much for yielding. 
Thank you, Chairman.
    And my first question would be--and I guess I'll go to Mr. 
Bloom and Mr. Cohen with this one, if I can. How much of an 
impact on the price of oil does the collusion between OPEC 
actually have? If we didn't have that collusion going on and 
OPEC didn't exist, how big a deal is it to the actual price of 
oil out there?
    Mr. Bloom. Well, Representative Chabot, I think we've had a 
real-world experiment over the last year and a half, ever since 
the additional production cutbacks were announced by OPEC in 
November of 2016 and then the 11 additional nations joined it 
in December of 2016. I've heard various statistics, but I guess 
the price of oil has about doubled from around $40 a barrel to 
now around $80 a barrel. I think that's a natural experiment of 
the impact of OPEC on oil prices.
    Mr. Chabot. I saw you nodding, Mr. Cohen, so I assume you 
agree.
    Mr. Cohen. Not only I agree, we have additional data. For 
example, in 2016, the amount of oil revenue in Russia was $8 
billion. In 2017, it was close to $32 billion. So it 
quadrupled, the Russian revenue quadrupled.
    Also, in the 1970s, because the Saudis cut production and 
then did not step in in 1979 when the Iran-Iraq War took off 
large amounts of oil from the market, the prices quadrupled, 
the oil prices quadrupled again.
    And these shocks, because they're so quick and sudden--
sometimes the price doubles in 6 months--these are malignant 
blows to the American economy and to the economy of the West at 
large. We are talking about massive wealth transfer from the 
United States, Western Europe, Japan, and now China to 
countries that are not democratic.
    And this goes to Chairman Handel's question of 
bipartisanship. I think, thank God, both Republicans and 
Democrats agree, concur, that we should not subsidize in tens 
of billions of dollars antidemocratic, suppressive, repressive 
regimes, from Venezuela to Iran and Russia.
    So that the idea of a market manager that somebody 
mentioned, that idea is not supported by the available 
evidence. What kind of market----
    Mr. Chabot. Let me cut in. I'm almost out of time, and I 
wanted to get back to one thing.
    Mr. Bloom, let me go back to you on this one. If we finally 
do pass this--and I know you worked with Senator Kohl trying to 
get this, and I've been working for years, and, again, 
bipartisan--could you quickly give the scenario of how this 
actually would play out? How would it actually make a 
difference? What procedure would occur?
    Mr. Bloom. Certainly.
    Well, you know, first of all, an important thing to note, 
as the legislation we worked on, is that the only party that 
would have the ability to file an action under NOPEC would be 
the U.S. Justice Department. And that was deliberate because of 
the foreign policy concerns inherent in this. And the Justice 
Department, as it would with any antitrust issue, would launch 
an investigation.
    And, actually, it wouldn't be very hard, because OPEC and 
its allies are so public and so proud of what they do they 
issue public statements. So this isn't like all these 
conspiracies we've seen in the past, like the lysine conspiracy 
and other conspiracies.
    You don't have to do much of an investigation, but they'd 
find out what the acts were. And then they would have the 
ability to file a lawsuit to challenge OPEC member nations and 
seize their assets or seek injunctive relief preventing this 
kind of thing.
    So the only thing I'd like to add to that is that----
    Ms. Handel. If we could just wrap up.
    Mr. Bloom. Sure. I'll wrap----
    Ms. Handel. I want to get to my colleague from Florida 
here.
    Mr. Bloom. Can I just wrap up with this one point? But the 
idea----
    Ms. Handel. Well, no. That was a clue that we're wrapping 
up. It wasn't a question. Sorry.
    Mr. Bloom. Okay.
    Ms. Handel. If I could now recognize my colleague from 
Florida, Representative Demings.
    Mrs. Demings. Thank you so much, Chairwoman and to our 
Ranking Member. And, Chairwoman, thank you for your commitment 
to the efficient use of time this morning.
    But I am also interested in exactly how it would play out 
if the Department of Justice did file a lawsuit, so please 
continue what you were going to say.
    Mr. Bloom. Thank you very much, Madam Congresswoman.
    So what I was going to say is I think the best way this 
would play out would actually be no antitrust lawsuit at all. 
It would be used by the executive branch, by the Justice 
Department, by the State Department, in negotiations with OPEC 
or their member nations, and say: Look, this is what we can do. 
We have the ability to do this, and we can go seize your assets 
here in the United States, but we'd rather not.
    And I think the threat of that, or the arrow in the quiver 
of negotiations, would restrain and deter at least some members 
of the oil cartel from engaging in these practices. So that, in 
my ideal world, would be the way it would work.
    Mrs. Demings. Are you aware of any prior attempts on the 
Justice Department's behalf to take action?
    Mr. Bloom. Well, I am not because of the precedent of a 40-
year-old decision in the Federal court in California, 
International Association of Machinists, which basically held 
that the OPEC member nations were exempt under sovereign 
immunity, despite the express exemption of the commercial 
activity exemption in the statute.
    So I think that's deterred our Justice Department from 
pursuing this.
    Mrs. Demings. Okay. Thank you very much.
    Mr. Bloom. Thank you.
    Mrs. Demings. Dr. Cooper, in your written testimony, you 
note that the Trump administration has reversed fuel-efficiency 
standards that are critical to saving American consumers money 
while also reducing consumption of oil over time. We've all 
talked about the importance of self-sufficiency.
    Can you, for my benefit and the record, describe the 
benefits of fuel-efficiency standards? And how significant are 
these estimated benefits? Do they substantially outweigh the 
cost of imposing fuel-efficiency standards?
    Mr. Cooper. Well, the agencies that have been responsible 
over the 10 years since EISA was passed have taken the law 
seriously. They produce a long-run path of increasing fuel 
economy. And the automakers have done well; they've done 
extremely well under it. The cost of efficiency has plummeted 
because they're good capitalists. You tell them to do 
something, they figure out how to do it the least-cost way 
possible.
    They're now all talking about going to electric vehicles, 
which really is the bullet aimed at the heart of the oil 
industry. You have to realize that the commitments around the 
world to going to electric vehicles means the end of the oil 
industry. And it's very hard to think about, because we know 
that the price of oil will plummet as everyone starts driving 
electric vehicles. And then the question is, how do you make 
sure you keep on that path?
    So there is no doubt that this was a program remarkable for 
the cooperation between EPA and NHTSA, remarkable for the 
cooperation between Washington and California, that has really 
worked extremely well.
    It's the right thing to do when Congress--as I said, they 
almost passed NOPEC, and they did pass EISA at a key moment. 
Ten years later, it works. It's working. And abandoning it is a 
huge mistake. It's illegal. It's flat-out illegal.
    Mrs. Demings. Could you elaborate a little bit on what 
impact it would have on those companies that have already begun 
to comply with the regulation?
    Mr. Cooper. Well, the interesting thing is there's a 
massive industry that has been built up around fuel economy. 
That industry disappears if you freeze and roll back.
    The automakers get some short-term gains, but then they've 
got a real problem. Our cars are out of step with the rest of 
the world. They can't sell cars anyplace else. And they've sort 
of suddenly discovered that. You cannot be a successful 
automaker today if you can't sell to the world. Thirty years 
ago you could, but today you can't. And they understand that. 
They manufacture cars overseas which comply with the overseas 
requirements. They just don't want to manufacture them here.
    So they need help. We've seen that. They clearly--
management is very short-term. They need to be long-term. The 
whole world is going to electric. A lot of American companies 
are talking about electric, but they need that extra push to 
make sure they stay the course.
    So we have a plan that's working, that's right. NOPEC would 
be fine, but the problem is that the price of oil would go to 
$40 a barrel, but then it would go back up slowly. Because if 
the world didn't stop increasing its use of oil, you could not 
keep the price down, let's be honest. So you need all of these 
other nations to lower their consumption too.
    Mrs. Demings. Very quickly, Dr. Cohen.
    Mr. Cohen. Unfortunately, Madam Congresswoman, the 
developed world, which is responsible for the production and 
purchase of the majority of new vehicles--India, China, et 
cetera--are not doing what Dr. Cooper is describing. China, to 
a great degree, yes. India, for example, or Africa are not. 
They're still buying gasoline engine cars. And oil consumption 
is growing in the world and projected to grow for about 25, 30 
years.
    Mrs. Demings. Okay. Dr. Cohen, unfortunately, I am out of 
time.
    And thank you. I yield back to Madam Chair.
    Ms. Handel. Thank you, Representative.
    This concludes today's hearing. I want to thank every one 
of our witnesses. This was very good information. I know you 
had so much more that you wanted to impart upon us, but I also 
know that it's in your written testimony as well.
    So, without objection, all Members will have 5 legislative 
days to submit additional written questions for the witnesses 
or additional materials for the record.
    With that, this hearing is adjourned.
    [Whereupon, at 10:48 a.m., the Subcommittee was adjourned.]
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