The announcement by the United Arab Emirates that it will leave the OPEC cartel tomorrow, 1 May, must surely mark the death-knell for that teetering organisation. Weakened by the departure of Qatar in 2019, the capricious behaviour of Saudi Arabia on every occasion that unilateral decisions contrary to the cartel’s agreed policies seem appropriate to Riyadh and, most recently, open violent attacks from fellow OPEC member Iran have made it politically indefensible for the Emirates to remain a member.
The Israeli and US attacks on Iran and the ensuing conflict, including Iran’s weaponisation of economic capabilities, has once more highlighted the vulnerability of the world’s energy supply industry to hostile intent. OPEC’s aim was to control oil output in an effort to bolster price points and protect revenues. The new reality is that the free market is going to exercise control, at least for a while. OPEC is unlikely to survive the current march of progress, particularly if Washington exercises its control over Iraq’s oil revenues to pressure that nation into leaving the cartel also.
With Qatar and the UAE having left OPEC, Venezuela having lost any credible impact and Iraq, Iran is increasingly isolated as it marches inexorably towards military defeat. Saudi Arabia will continue to follow its own path of national self-interest, but it would seem that the spectre of OPEC looming on the economic horizon may soon be a chimera of the past.
Meanwhile the UAE is free to make better use of the 5 million barrel a day capacity it has built in recent years, compared with the 70% of that capacity that compliance with OPEC protocols has limited it to till now. Taking all the external factors and pressures into account, Abu Dhabi’s decision was really a no-brainer. And the picture of the world we grew up with continues to change…
Tim Mahon
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