The UAE is leaving OPEC on Friday : NPR
UAE Minister of Energy and Industry Suhail al-Mazrouei arrives for an OPEC meeting in Vienna, Austria, June 4, 2023.
Joe Klamar/AFP via Getty Images
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Joe Klamar/AFP via Getty Images
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The United Arab Emirates announced it was leaving OPEC, the cartel representing major state-owned oil producers, on May 1.
In a statement published in state media, the UAE wrote that the decision “reflects the UAE’s long-term strategic and economic vision and its evolving energy profile, including accelerating investments in domestic energy production, and reinforces its commitment to playing a responsible, reliable and forward-looking role in global energy markets.”
OPEC includes large state-owned oil producers like Saudi Arabia, Kuwait and Iran; the United Arab Emirates joined the group almost 60 years ago, just a few years after the cartel was created. As a group, OPEC members set their oil production levels with the goal of balancing oil markets and keeping oil prices high enough to meet their domestic fiscal needs, but not so high as to harm the economy and reduce demand for oil. (If every country produced as much oil as it could, the rules of supply and demand would drive crude oil prices down sharply and reduce their revenues.)
In recent years, as part of the broader OPEC+ alliance, countries such as Mexico and Russia have also agreed to negotiate with OPEC over production levels. The United States, which has no state-owned oil producer, does not officially participate in OPEC negotiations, although some presidents have made demands of OPEC and some U.S. oil executives have been accused of colluding with the cartel.
The UAE’s departure from the group comes after years of friction. The United Arab Emirates has been angered by its production caps, pushing to increase quotas and produce more oil, while Saudi Arabia, OPEC’s largest producer and its dominant force, has pushed back. The dispute has sometimes prolonged or delayed OPEC meetings.
Meanwhile, political relations between Saudi Arabia and the United Arab Emirates – once close allies – have deteriorated for reasons other than oil. Both countries support opposing forces in Yemen and compete economically.
A former UAE government official, Tareq Alotaiba, recently wrote that the war in Iran strengthened the UAE’s ties with partners like the United States, Europe and Israel, while its Arab neighbors “covered up, equivocated and, in some cases, pushed for their own agendas even as states were attacked.” Many countries around the Persian Gulf have been targets of Iranian attacks since the start of the war; the United Arab Emirates, located just across the Strait of Hormuz from Iran, has been particularly targeted.
“OPEC and OPEC+ have never been as strong as their members’ desire to hold barrels out of the market, and the UAE was one of them,” writes Jorge Leon, head of geopolitical analysis at Rystad Energy, in an emailed note to NPR. “Saudi Arabia must now take on more of the work when it comes to price stability, and the market is losing one of its few remaining shock absorbers.”
For now, the UAE – like other oil producers in the region – is limited in the amount of oil it can export due to reduced traffic through the Strait of Hormuz.
In the long term, however, the departure of a major cartel member will weaken OPEC’s ability to control the oil market.
