The exit of the United Arab Emirates is the most significant in a series of departures from the oil cartel in recent years.
OPEC will be less powerful without one of its leading members, the United Arab Emirates. The question is: How much?
The emergence of the United States as the world’s largest oil producer has diminished the grip that the Organization of the Petroleum Exporting Countries had over the global market, as has the departure of several of the cartel’s members.
But the announcement on Tuesday that the Emirates, a major oil producer, is leaving after more than 50 years of membership comes at a difficult moment for the organization. The United States and Israel are locked in a uneasy standoff with Iran, a founding member of OPEC that has effectively shut down much of the flow of oil and natural gas from the Persian Gulf. During the two-month war, Iran has also attacked its partners in the cartel.
“There’s no way to underplay U.A.E.’s departure,” said Frank Fannon, who was an assistant secretary of state for energy resources in the first Trump administration. “It’s part and parcel of a general shift. There’s the lack of trust among members, particularly with one of them shooting at other members. It’s a very big deal.”
For now, the chaos in global oil markets from the war with Iran and effective closure of the Strait of Hormuz, a crucial Persian Gulf shipping channel, is overshadowing the fallout from the Emirates’ pending departure. Regardless of how many members OPEC has, the Gulf has become an unreliable energy supplier.
Indeed, oil prices hardly budged in response to the Emirates’ announcement.
The longer-term consequences will become clearer if and when the strait reopens, allowing producers throughout the region to return to prewar production and export levels.