Amidst the ongoing conflict between America and Iran, the United Arab Emirates (UAE) has decided to withdraw from OPEC and OPEC+, the organization of oil producing countries. The UAE said that considering the economic outlook and the changing energy scenario, it decided to withdraw from this alliance after 60 years. OPEC is an alliance (cartel) of major oil-producing countries that coordinates production policies to influence global oil supply and prices.
UAE out of OPEC
UAE said in a statement that it is also withdrawing from OPEC+. Russia is also included in OPEC+. This step is being considered a big blow for OPEC and its key member Saudi Arabia. This group collectively produces about 36% of the world’s oil and controls about 80% of oil reserves globally.
The UAE has long been demanding higher production quotas within OPEC, as it wanted to expand its production capacity beyond the limits set by the cartel. OPEC was founded in 1960 by Saudi Arabia, Iran, Iraq, Venezuela and Kuwait. UAE joined it after 7 years. The UAE is among the world’s top 10 largest oil producers and contributes about 3% to 4% of global oil production.
OPEC will be affected due to UAE’s exit
Experts believe that due to UAE’s exit, OPEC has lost about 15 percent of its production capacity and has also lost one of its most disciplined (rules following) members. According to the latest OPEC data, the UAE produces about 2.9 million barrels of oil every year. At the same time, the production of Saudi Arabia, the de facto leader of OPEC, is about 9 million barrels of oil.
It will be difficult for Saudi Arabia to keep the remaining OPEC members united and it will have to bear most of the burden of internal compliance and market management alone. Other members of OPEC can also follow the same path. This situation reflects a fundamental geopolitical reshaping in West Asia and global oil markets. Now this alliance includes countries like Iran, Iraq, Kuwait, Saudi Arabia, Venezuela, Algeria, Equatorial Guinea, Gabon, Libya, Nigeria, Congo.
What impact will UAE’s decision have on India?
With UAE’s exit from OPEC, questions are also being raised that what effect will it have on the world and India? First, due to the situation on Hormuz due to the Middle East war and now due to this decision of UAE, there are fluctuations in the prices of crude oil. However, it is too early to say whether this will be a relief for countries like India. If UAE increases oil production then the price of oil will reduce.
India-UAE relations have evolved into a major strategic partnership over the last few years. UAE has emerged as India’s third largest trading partner and a major source of Foreign Direct Investment (FDI).
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