For more than five decades, the Organization of the Petroleum Exporting Countries (OPEC) has dominated the global oil market. Led by Saudi Arabia, OPEC leverages its vast supply of cheaper oil to engineer prices that suit their domestic priorities. From the 1973 oil crisis to the 2020 Saudi-Russian price war, this market manipulation inevitably occurs at American expense.
Despite resurgent U.S. oil production, OPEC nations still control the global oil market, accounting for 44 percent of global oil production and owning 80 percent of the world’s oil reserves. This hold over the global oil market has increased in recent years due to growing coordination with a group of nations termed “OPEC+”: 10 non-OPEC countries, led by Russia, that share similar oil market priorities.
The OPEC/OPEC+ hold over the global oil market means the United States is operating in an unfree market, structurally imbalanced in favor of nations with national oil companies that act as revenue-generating arms of governments that share neither our strategic priorities, nor our free-market values.
American innovation in the shale patch has rewritten the global energy rulebook by unlocking oil reserves previously considered economically inaccessible—a technology-driven revolution that has turned the United States into the world’s largest oil producer. The results have unquestionably enhanced American energy security: our need to import oil from unstable parts of the world has dramatically reduced, and rising production compelled Congress to lift the U.S. oil export ban.
However, the global nature of oil pricing—in which a disruption in demand or supply anywhere affects prices everywhere—means the U.S. oil sector remains vulnerable to the outsized influence of OPEC and OPEC+, regardless of how much oil the nation produces. SAFE advocates for policies that reduce the structural imbalance in the global oil market, by raising the cost of market manipulation for those nations that engage in such a practice. American and global antitrust norms are applied to almost every industry worldwide, except the oil market: OPEC nations and their national oil companies invoke sovereign immunity and the act of state doctrine, to operate without regard for U.S. anti-competitive laws in the market for the world’s most important commodity.
Competition With China
It is widely anticipated that the transportation sector is on the cusp of a transformational shift toward an electrified, digitized future. However, this shift is currently being led by China, which seeks to gain greater global authority by attaining significant leadership positions in a variety of emerging industries. As outlined in its Made In China 2025 initiative, electric vehicles is central to this strategy.
The benefits to China for vehicle electrification are compelling. The country is the world’s largest oil importer, exposing it to the same global oil market volatility that affects the United States, and reducing the oil intensity of its economy therefore allows for greater policy flexibility and autonomy. But if the United States loses out to China in the race for leadership in the electric vehicle supply chain, the United States will find itself stuck in the position of switching its reliance on an unstable oil market for transportation fuels for a reliance on China for its future transportation needs.
SAFE advocates for a comprehensive American electric vehicle supply chain, from minerals to markets, that encompasses the production, processing and manufacturing of strategic minerals and batteries required to power the next generation of transportation technology. This shift toward an electrified future presents the United States with an opportunity to build a transportation system that works in our national interest, and we must move swiftly to take this chance.