The United Arab Emirates has announced its intention to leave the Organization of the Petroleum Exporting Countries (OPEC) and the OPEC+ alliance. The announcement by the Emirati news agency Wam represents a seismic shock for the global energy market.
What is OPEC and why did the United Arab Emirates decide to leave the organization
Born in 1960, OPEC is an economic cartel that brings together some of the main crude oil producers in the world. Members decide together how much oil to extract and agree to protect their earnings by ensuring constant income. If production is cut, the price rises; if it is increased, the price falls. The United Arab Emirates were part of the alliance in 1967, but the marriage will last a few more days. From May 1st the Emirates will be able to extract oil without subjecting to the limits imposed by the organization.
“This decision – reads the note – reflects the long-term strategic and economic vision of the United Arab Emirates, as well as the evolution of its energy profile, in particular the acceleration of investments in national energy production”.
After leaving OPEC, the statement reported by the Wam agency continues, “the Emirates will continue their responsible role by gradually and deliberately increasing production, in line with demand and market conditions”. The text underlines that “this decision does not change the Emirates’ commitment to the stability of global markets nor its approach based on cooperation with producers and consumers, but rather improves its ability to respond to evolving market needs”.
Trump’s background and role
The United Arab Emirates has complained in the past about the constraints imposed by OPEC and recently criticized other Arab states for not doing enough to protect them from Iranian attacks. Today they announce that they want to leave the organization which will now necessarily be weakened. As the Guardian points out, the Emirates’ move also represents a victory for Donald Trump who had accused OPEC of “robbing the rest of the world” by inflating oil prices.
A decision taken “to meet the urgent needs of the market”
“This decision – it is underlined in the note released by the Wam agency – came after a broad review of the production policy of the United Arab Emirates and its current and future capacity, and in consideration of the national interest and the country’s commitment to effectively contribute to satisfying the urgent needs of the market, while the short-term geopolitical evolutions continue through the turbulences in the Arabian Gulf and the Strait of Hormuz, which influence the dynamics of supply, with key trends indicating a continuous growth in global energy demand in the medium and long term term”.
“The stability of the global energy system depends on the availability of resilient, reliable and accessible supplies and the United Arab Emirates – the note recalls – has invested to satisfy demand variables in an efficient and responsible way, giving priority to the stability of supply, costs and sustainability”.
The UAE “affirms its appreciation for the efforts” of both OPEC and the OPEC+ alliance, but “the time has come to focus efforts on what the UAE’s national interest requires, and its commitment to partners, investors, importers and market needs, and this will be what it will focus on in the future.” The Emirates – concludes the note – “reaffirm their commitment to the role of responsible and reliable producer that looks to the future of global energy markets”.