The decision by the United Arab Emirates to leave the oil producers’ cartel Opec after 59 years is more than a symbolic break. It highlights a growing divide among major oil producers over how to respond to a changing energy landscape, and will weaken the group’s ability to manage global supply.
In the short term, the impact of the UAE’s exit will be limited. The world still needs every available barrel of oil, and the UAE accounts for some 3-4% of global production. But the forces behind the decision are more significant than the move itself. They are both economic and political – and the war in Iran helped the two align.
For years, the UAE has been investing heavily to expand its oil production capacity, spending around US$150 billion (£111 billion) to push its potential daily output close to 5 million barrels. But Opec quotas have prevented it from fully exploiting that capacity. Actual production has remained well below its potential at about 3.5 million barrels a day (mbd), with some 5 mbd capacity, constrained by the Opec quota system designed to restrict supply and support prices, generally shaped by the de facto leader, Saudi Arabia.
