(1) “The United Arab Emirates,” today “made a shock request of [Pakistan] — repay $3.5bn immediately” [1].
(2) Saudi-Emirati relations were at an all-time low before the Iran War [2]. (Saudi Arabia just bailed Pakistan out of its Emirati loan. Saudi Arabia and Pakistan agreed a mutual-defence treaty last year [3].)
Put together, we’re seeing an Emirati-Israeli axis emerging to balance Saudi hegemony in the Gulf and Iranian hegemony over the Persian Gulf. I’d expect to see an Emirati deal with Egypt and India next if this hypothesis is correct.
What I don’t yet see is the ambition of the endgame. Is it Saudi Arabia backing off in Africa? Or is it seizing the Musandam Peninsula, islands of the Strait and possibly even territory on the other side?
Someone's going to have to provide me with an explainer of how many different proxy forces are involved in Yemen. I can barely keep up with Lebanon and have forgotten Syria.
> an explainer of how many different proxy forces are involved in Yemen
RealLifeLore has been doing a decent job covering it [1].
The broad summary is you have the Saudi-backed unity government, the Iranian-backed Houthis, who claim all of Yemen but practically want North Yemen, and the UAE-backed STC, who also claim all of Yemen but practically want South Yemen. Emiratis bring the Israelis to the party. The Iranians bring the Russians. The Saudis bring various international elements (I know less about them than the Houthis and STC).
Also...their central bank governor quietly asked the US Treasury for a dollar swap line...Combined with the Pakistan $3.5B recall and OPEC exit, that is three coordinated moves of a cashflow stressed country...and of course the US is being asked to extend taxpayer backed dollar credit to the same royal family that bought 49% of Trump's crypto company four days before inauguration...
Its a pakistani submarine, with exclusive saudi-royalty members on the bridge.
We should build a city that is a statistical bunker- basically a line, for the edge case of jihadist insurgents getting the forbidden eggs in the cake.
My bad, it's late in the evening here and I typed something that works when spoken with emphasis and timing (at least in my head).
I added quotes, it should say that Pakistan's weapons program is one that is outside the Nuclear Non-Proliferation Treaty as Pakistan is not a party to it.
> Put together, we’re seeing an Emirati-Israeli axis emerging to balance Saudi hegemony in the Gulf and Iranian hegemony over the Persian Gulf. I’d expect to see an Emirati deal with Egypt and India next if this hypothesis is correct.
Don't Egypt and Israel hate each other though? Could UAE feasibly align with both?
Virtually all Arabs hate Israel but Arab governments are more varied. The modern Egyptian state is oriented toward close partnership with the US, and a large part of that was peace with Israel post '73.
They've also been cooperating on blockading Gaza for a couple of decades. Israel gets most of the attention for that, mostly rightfully so, but people seem to forget that there's a border with Egypt too and that has also had very limited access.
Egypt learned on other's mistakes for once. They saw how Jordan welcomed Palestinians on their land and they repaid the kindness by launching a coup against the government in 1970. No wonder not a single anti-Israeli coalition country is willing to deal with Palestinians directly at their own home and are keeping borders watertight :) .
This is to a large part to give Egypt plausible deniability. They don’t want to deal with Gaza, refugees, or a humanitarian crisis, but also don’t want the political fallout of taking action like the Israelis do.
People don't forget it. But Egypt is a dictatorship aligned with US/Israel, so there's again not much we can do there. Ending foreign aid to Egypt is probably very aligned with ending foreign aid to Israel in terms of popularity among American voters
> Ending foreign aid to Egypt is probably very aligned with ending foreign aid to Israel in terms of popularity among American voters
I strongly suspect the average American has absolutely zero sense of how much foreign aid we give Egypt. That's not to contradict your point directly, just that it isn't a very salient part of American politics (unlike Israeli foreign aid).
> it isn't a very salient part of American politics (unlike Israeli foreign aid).
I feel like Israeli aid, while vastly more salient than it used to be, is still mostly salient as a left-of-center wedge issue, otherwise being about as salient as your average major foreign policy issue - ranking just under the least salient domestic policy issue, which ranks just under the most minor personal quality of any candidate, which ranks under the current state of the economy, which ranks under the current perceived state of the economy. Wow, that's way too many times to use "salient" in one sentence.
And for the record, I'm not arguing about how much people should care, just how much they do.
If Egypt were a democracy, its government would hate Israel. That's why the current dictator overthrew the last democracy and had its elected leader die in jail, and that same dictator is now supported heavily by US funding
IMO the Pakistan aspect is overstated. This is a reversion to the norm of KSA-Pakistan relations before Imran Khan completely destroyed it by fully aligning behind Qatar and Turkiye when both were competing against KSA.
It’s complicated [1]. My low-key guess is cutting off Pakistan was intended to send a message to Cairo.
> Already aligned with the UAE
Aligning. To my understanding there isn’t a treaty yet.
> the Pakistan aspect is overstated
Pakistan isn’t the cause. It’s the canary. These moves happening in quick succession (strategically, over the last year, and tactically, in the timing of these announcements) speaks to previous assumptions being fair to be questioned.
> My low-key guess is cutting off Pakistan was intended to send a message to Cairo
Abu Dhabi and Cairo have been misaligned for years since the Sudan Civil War began (UAE backs the RSF and KSA+Egypt back the Army) as well as the UAE backing Abiy Ahmed in Ethiopia at the expense of their traditional partner KSA.
> To my understanding there isn’t a treaty yet.
This is as close as it will get. New Delhi doesn't "sign" defense treaties unless pushed to a corner, because it reduces maneuverability.
The Pakistan-KSA alignment was already cooking after IK was overthrown. I think I mentioned it before on HN (need to find the post I wrote) but given the primacy Pakistan has had in US-Iran negotiations well before the war as well the PRC's increasingly miffed attitude at Pakistan following the CPEC attacks, the US most likely brokered a back-room realignment between PK and KSA.
A neutral-to-ambivalent India with a pro-America Pakistan is better for the US than a completely aligned India with a pro-China Pakistan.
My guess is that is this because UAE has ports on the other side of Hormuz and doesn't want to be restricted in their usage by OPEC? Does this mean UAE thinks Hormuz will be a problem for a long time? And what does it mean for oil prices long term?
> My guess is that is this because UAE has ports on the other side of Hormuz and doesn't want to be restricted in their usage by OPEC?
Does OPEC limit that? It would be very surprising to me if they did, as the point of opec is only to limit production when oil prices are low. They aren't low right now.
Oman benefits significantly more from the war in Iran than the UAE, but is the most favorable country towards Iran in the GCC. See the visual here: https://archive.is/Xt3gd
Saudi Arabia and the UAE have been urging the US to bomb Iran since 2015 for their own non-oil reasons. They see political Islamism as a strategic and domestic threat. That's why they had Qatar under a blockade for a number of years. Iran is their biggest rival, exporting militancy to Yemen - the Houthis who UAE and Saudi Arabia battled for a number of years last decade. A number of attacks on Saudi and UAE oil and gas facilities from Iran Quds-backed militant groups in Iraq across 2019-2022. None of this makes the news in the West.
UAE's major issue with Saudis is their quiet support for Islamism as well. They know countries like Iran exploit for it like a wildcard which always backfires and destabilizes the region, which is bad for business.
They are a wannabe Israel, a bad faith actor sowing chaos for geopolitical advantage. They've been spending money on Washington lobbyists to advocate for this war for a long time. And this isn't the only skulduggery they've been up to. They've supported the warlord Haftar in Libya and the genocidal RSF militia in Sudan.
They've hired American mercenaries to assassinate Islamist civil society figures in Yemen. They pay European right-wing influencers to spread anti Muslim content (yes you read that right). They are the buyer for conflict gold coming from the Congo. In short they are a problem.
The UAE has the ADCOP (Abu Dhabi Cross Oil Pipeline) to move oil to beyond the Strait. It has a capacity of ~1.8Mbpd (million barrels per day) so is only a fraction of the UAE's total oil exports and a tiny fraction of the oil exports impacted by the Strait being closed. It's also being used already. I don't know how these particular oil exports have been impacted. They are beyond the Strait but not by that much. Iran is still entirely capable of harassing shipping there.
I believe the US has given tacit approval or is behind this move entirely for what comes when the Strait inevitably reopens and that is to get the UAE to export well beyond what they might otherwise as an OPEC member.
The UAE like most GCC countries is entirely dependent on US arms to maintain their regime so I simply cannot imagine them doing this without the US putting them up to it or looking the other way.
It also looks fairly easy to mine/blockade outside of their territorial waters. You don’t need that many drones to make the whole area unusable for marine transport. The strait is the clearest choke point but I don’t know how much bypassing it would help UAE
As democratic popular opinion turns against classical liberal economic principles, many theocratic or monarchist hell holes are increasingly becoming the unexpected underdog turned winners in economic freedom. It's been fascinating to watch.
My understanding is that unique historical, cultural, and even geographical factors have led to this outcome for Oman. I would encourage you to read up on the history of the country to understand the nuance here and not paint with such a broad brush.
Everyone has a unique "..." and a nuance here and a nuance there.
UAE has a unique yada yada and also ended up with a surprisingly remarkably free economic index despite being a theocratic monarchy.
As did the monarchy Lichtenstein, British controlled Hong Kong, and the one-party state of Singapore (technically democratic, in practice it functions like a recallable monarchy).
Also of note the three richest countries by GDP PPP per capita are Monaco (hybrid monarchy with monarchist veto powers), Lichtenstein (hybrid monarchy with monarchist veto powers), Singapore (single party state).
I'm not sure what the conclusion is from this other than that the wealthy love having an autocratic tax haven microstate to park the money they earned from liberal democracies in.
The UAE was talking about getting a credit swap line from the US. It could be the condition.
Or it is also part of a long term plan of the US to control all energy routes. It will keep Hormuz closed and try a new pipeline via the UAE to the Gulf of Oman.
Fragmentation of the energy producers is another goal. New Alaskan LNG projects have been approved and are all the rage among senators:
"Alaska LNG will deliver vital #EnergySecurity for our military and allies in the Pacific. Thank you @SenDanSullivan for your continued engagement and advocacy."
The US would control the following:
- Baltic sea via pipeline threats.
- Corridor from the Caspian sea from Azerbaijan through Armenia to Turkey.
- Venezuela.
- UAE corridor to the Gulf of Oman.
Probably much more than that. Grabbing the Arctic route via Greenland has failed so far.
Serious question: what is OPEC’s influence in 2026? Most analyses I’ve read suggest that it’s essentially a defunct organization and has been since the 1980s, due to (1) a lack of geopolitical agreement between members, and (2) a lack of punishment/compensatory mechanisms for when individual members cheat on their commitments.
It's a good question. Let me answer the question this way: OPEC is the biggest single factor for the inflation shock of 2020 to 2022 yet weirdly hardly anybody talks about it.
Let's rewind to March 2020 and the start of the pandemic. For a very brief period, April oil futures went negative. Technically, this was an extreme contango market. Oil producers were running out of places to store oil and nobody was buying.
For some more background, OPEC tries to maintain oil price stability. If it gets too low, they don't make enough money. If it gets too high it creates political instability and jeopardizes security relationships with the US and Europe. So every 3 months OPEC meets and looks at oil supply and the projected demand and they adjust production to maintain a price floor and a price ceiling. Before the war this was typically $70-80. In years past it might've been $60-70. They don't always succeed because of exteranl factors, unforeseeable changes in demand or even just member countries lying about production or production cuts.
So in April-May, the then Trump administration went to Saudi Arabia to get them and OPEC to cut oil production [1][2][3]. Instead of the 3 monthly reviews which would've naturally cut production anyway to maintain the price, Trump browbeat MBS into a 2 year production cut, initially 9.7Mbpd (million barrels per day) and then reducing over time to I believe 6.3Mbps [4].
This was a disastrous deal. You can overlay a chart of the 2 year deal and global inflation and they match up pretty much exactly.
The Biden administration quietly went to MBS and asked him to end the deal. He refused. There are historical reasons for this, namely that the US (under Trump) had kinda screwed Saudi Arabia over in 2015, 2017 and 2018 but I digress.
So in the US the politics of this were that Republicans were going to pin this on Biden (even though it was a Trump deal) and the Democrats were never going to blame Saudi Arabia. Instead it was just "oil companies are greedy and bad" from a pure short-term politics POV. Nobody brought up the 2020 OPEC deal. And that's wild to me. It just goes to show that US foreign policy is uniparty and a Democratic administration was never going to publicly split with an ally like Saudi Arabia.
So does OPEC matter? Well they were instrumental in enforcing that deal. So you tell me.
OPEC doesn't adjust production. They set production targets, and then most of the members cheat. For geological reasons it's not even really possible to significantly reducing production on many oil wells without damaging them. Saudi Arabia generally has more freedom to throttle production up or down than other OPEC members.
That really does highlight how badly the US is a controlled petrostate, and how different that is to past events where the US goes around demanding that OPEC raise production.
You have another thing which is that MBS (correctly) felt comfortable ignoring Biden. If he'd slighted Trump in that way it would probably take 2 private jets to undo the damage.
Unlikely. Out of OPEC’s twelve members [1], one is controlled by Trump, one—the third largest—is bombing the UAE and the other—the absolute largest—is on the other side of every proxy war the Emirates are invested in. As a multi-lateral organization it’s about as fucked as BRICS.
My understanding is basically that OPEC is similar to a workers union. Countries band together and set terms that dictate the price and the supply available in the market.
UAE leaving OPEC is like breaking up a workers union. UAE is no longer required to restrict how much oil it exports, and also doesn't have to set a price floor. They're allowed to sell more oil cheaper, potentially at the expense of neighboring OPEC countries.
Which to me sounds like a good thing for the rest of the world?
Ordinarily a Cartel is illegal. If say the US breakfast cereal manufacturers decided to all agree they'll charge a minimum $20 per kilogram, no bulk discounts, the government can and likely will (assuming they don't remember to bribe Donald Trump) prosecute them and force them to stop doing that.
If you've been involved in an SDO ("Standards Development Organisation" think ISO or the IETF although the IETF would insist that they are not in fact an "Organisation" they will admit to being in effect an SDO) you've probably at least glanced at documents explaining that you absolutely must not do anything which looks like Cartel activity, you can't use the SDO to agree prices, or to cut up territory or similar things. The SDO's lawyers will have insisted they make sure every participant knows about this because they don't want to end up in prison or worse.
However the trick for OPEC is that it's a cartel of sovereign entities. It can't be against the rules because its members are the ones who decide the rules. So Chevron and Shell and so on cannot be members of OPEC but the UAE and Venezuela can.
> Which to me sounds like a good thing for the rest of the world?
It probably isn't a bad thing, but let's not overestimate the beneficial effects. The reason oil prices are high right now isn't because of cartel fuckery, it's because of Trump and his war. And oil supply chains are in such chaos because of Trump's war that even if it ended tomorrow it would take markets multiple years to return to a pre-war state.
The bottom line is that oil prices are going to be elevated for years to come, and when oil prices are high, OPEC has nothing to do other than sit back and collect the profits. And thanks to the ongoing solar revolution, oil's days as the world's predominant geopolitical poker chip are numbered; by mid-century OPEC won't be relevant anyway.
By mid century, worldwide fossil fuel usage will be higher than it is today. Solar will take over some of the electricity production including transportation but in the overall energy mix it will largely be a supplement, not a replacement. Total per capita energy use from all sources will continue to increase at a rapid rate.
> By mid century, worldwide fossil fuel usage will be higher than it is today.
Even if this turns out to be true, it would be irrelevant. The reason that oil occupies the geopolitical role it does today is because of its potential to rapidly bring the entire developed world to a halt. Oil will always be in demand because of its many useful applications (and this demand may even grow in absolute terms despite declining per-capita consumption, because the global human population is projected to continue increasing well into the latter half of the century), but as an energy source, by 2050 it will have so many highly-available complements that an oil cartel will be as relevant as a potato cartel.
The basics are the same as any other cartel. OPEC states cover enough of the supply-side of the market to be able to keep prices artificially high.
UAE leaving means UAE can price below OPEC's target and take more of the market. OPEC will have to react and lower prices or concede some of the market.
Does any of this matter if the major players can't ship oil through Hormuz? Who knows...
OPEC was never a very effective cartel in the first place. Many of the members routinely exceeded production targets. And for geological reasons it's not like most oil wells can even be throttled down.
OPEC is a cartel of Arab oil-producing countries, including UAE. They limit production in order to keep the world oil price artificially high. UAE is pulling out of the cartel, presumably so it can bypass the restrictions and cash in on the high prices caused by the Iranian conflict. AFAIK this is the first time a country has pulled out of OPEC, and hopefully, it will lead to its demise.
The very short explanation is that they kind of want to be not-Saud and has trouble cooperating with Saudi Arabia for a rather long time, not just over fossil fuels but also in Yemen.
Recently the UAE faction in Yemen was forcefully reined in by the house of Saud, and OPEC kind of prioritises different things than the UAE, i.e. not pushing profits hard in the short to medium term instead focusing on stability and predictability.
Currently the saudis are trying to resolve the Hormuz issue and the attack on Iran through diplomacy, which the UAE is not exactly fond of and would rather see a violent solution. In part this is coloured by the close relation between the UAE and Israel, both of which share the view that running militant factions in failed states is preferable to orderly international relations between sovereigns. The saudis aren't as keen on this type of foreign policy and in other aspects also not as friendly with Israel as the UAE.
The UAE has been signaling that they don't really want to be a part of OPEC since at least 2020 or so. Them actually leaving was to be expected, the question should have been 'when' rather than 'if'. Iranian retaliations on the UAE and subsequent damage to the reputation of mainly Dubai and Abu Dhabi as well as capital flight probably strengthened the UAE politicians longing to get out of OPEC and start pumping and selling at full capacity to try and make as much money as possible as fast as possible.
If the UAE does not do this it'll be more exposed to credit and currencies besides the US dollar, which they probably find rather inconvenient.
This is how peak oil happens. Without a healty cartel, oil is doomed. Solar, wind, geothermal, hydro, nuclear. These are more than ripe to disrupt energy into the 21st century.
The goal of the cartel was to stabilize prices right in the sweet spot to keep the world addicted. Too low and players start losing money, too high and people switch away from oil, too much volatility, and people switch away from oil.
> The goal of the cartel was to stabilize prices right in the sweet spot to keep the world addicted.
If the price of oil remains low the gulf governments can't fund their social programs and risk instability. That may not be the only reason for OPEC but it's a major one.
When fracking really took off the writing was on the wall and I think many OPEC nations have since taken serious measures to shield themselves from price drops. This is probably why the UAE can now feasibly leave OPEC. I thought the fracking boom was the end of OPEC but they managed to hang on. I do know that fracking put a price ceiling on oil. Shocks aside, like the Iran war, once oil gets in the $80-90/bbl range (if not lower) fracking becomes profitable and that capacity comes back online. I've driven through Big Spring TX and the Permian Basin, it's all right there ready to go. They're just sitting on it until it makes money pulling it out of the ground.
Only the non-competitive ones. That's how competition works.
OPEC would be deemed an illegal anti-consumer price fixing scheme under the laws of any country with even the most basic of anti-trust laws, if not for the fact that its entirely composed of sovereign countries not subject to any law but their own.
If the price is too low and fields stop being exploited because they're unprofitable, you reduce the volume produced each day. That means there's scarcity with a low price, and you're back at trying to switch en energy source because you just can't get oil.
That moves prices upward, because people are willing to pay more, but increasing production is not like turning the faucet in your home. It takes time. This is the instability of oil production that OPEC tries to prevent, to keep the world hooked on readily available just cheap enough oil.
In a free market "scarcity with a low price" is a contradiction. If there's scarcity the prices will be high, not low. And nobody's going to be reducing production if the prices are high.
> instability of oil production that OPEC tries to prevent
First of all, if the goal is to prevent instability OPEC is doing a terrible job. Secondly, a cartel is not needed to prevent price instability, as demonstrated by the hundreds of other commodity markets around the world which are not controlled by cartels engaging in price fixing schemes.
As with any cartel, the purpose of OPEC is to maximize profits for its members, artificially fixing the price of oil at a level higher than what it would otherwise be in a free market not controlled by a cartel. Price stability is a side effect of that, not the goal.
A healthy cartel means consistent oil prices. Without it, oil may average cheaper over the long term (and almost certainly over the short term), but there will be a lot more variance.
I guess the silver lining from this mess is that maybe some
more governments realize they don’t want their energy policy to force them into a recession every time there’s a conflict in the Middle East
> Solar, wind, geothermal, hydro, nuclear. These are more than ripe to disrupt energy into the 21st century.
Yes and we've seen negative electricity price in some EU countries a few days ago: very sunny days but not too warm, perfect for solar panels. Supply surpassing consumption: negative electricity prices.
While we're, supposedly, living through an energy crisis. There may oil shipment issues and there are issues with energy due to the Russia/Ukraine war too but... Many already understood that there were solutions to not be entirely dependent on oil.
Doomsayers are going to argue that "we need electricity during the winter at 6 pm" so a "largely negative electricity on a sunny sunday means nothing" (Belgium, two days ago: hugely negative electricity prices, for example and it's not the only case) but the truth is: we're not anywhere near as dependent on oil as we were during the Yum Kippur war / 1973 oil shock.
And oil is definitely limited in how high it can go for as soon as it goes up, suddenly other energy source make more and more sense economically.
Once again: negative electricity prices two days ago. Let that sink in.
The problem is that grid scale power plants can't just turn on when the sun isn't shining. If the negative prices during the day and positive prices at night lead to energy storage, then it's a solution. Otherwise, it's just a glut at some times of day.
"Oil" is not a homogeneous thing. There are different grades of oil and refineries are built to process specific grades of oil. UAE produces the so-called "Dubai Crude" oil grade, which is very sought after.
It could be the first domino. They do have a port on the Gulf of Oman fed by a pipeline from their major fields well inland. This may turn out to be minimal for the world, but it could be huge for the UAE and their major customers.
The world will never run out oil supply, demand will likely go first.
There are dozens of ways to increase production through world peace, better drilling technology and ideological conversion. Most of African production is well below geological potential (Libya being the easiest example, but also applies to Nigeria and the DRC etc). European shale is barely investigated, Russia is restricted by sanctions, the Middle East by war. Antartica and the Falklands are relatively unexplored but feasible.
However, the electrification of transport will erode demand in everything besides heavy shipping and jet fuel. Without that demand oil prices will crater.
> The world will never run out oil supply, demand will likely go first.
Not sure I buy that. Oil will still be in demand as a chemical feedstock. In fact, there are already people saying that oil is too precious to use as a fuel.
Some oil fields also produce Helium. That's actually an element we don't have plenty of anyway. But most don't do that, the toxic black goop they're producing is almost all just a mess of Hydrogen + Carbon chains. Similarly "Natural gas" ie Methane is just CH4.
If we have plenty of energy anyway we can just make exactly what we need, no need to drill for a mix of pot luck hydrocarbons. If we don't have enough energy anyway then we're burning hydrocarbons to get energy and we might as well use them as a feedstock too.
Oil will only be in demand as a chemical feedstock as long as it's economically competitive with the alternatives. There's a substitute for virtually every petrochemical process if oil becomes scare (or expensive) enough.
Substitution is highly impractical in the short term but in a conversations of decades/centuries it's significant. Venezuela's reserves alone could run the world's petrochemicals for 60 years (Gemini) so it's a realistic perspective. Together with other proven reserves we could be okay for centuries.
The prediction has been "by around 2050" since forever¹. Any time people find a way to increase reserves, flow rate increases to compensate, and the prediction stays approximately the same.
That's to say, I think you forgot to update your number when time passed.
1 - time started at the 1970s, that's a well known fact
To anyone wondering, yes this is a consequence of the War in Iran but what this means isn't exactly clear. Or rather the consequences aren't clear.
For a super brief background, the US has what's been called an oil-for-security deal with Saudi Arabia since 1945. The US supports the Saudi royal family and Saudi Arabia keeps the oil flowing, which has largely been the case (other than 1973). Saudi Arabia remains the "big dog" in OPEC. OPEC+ is really about Russia even though it also includes Kazakhstan and Mexico. Russia became a major oil producer and exporter in the last 20-30 years.
OPEC generally likes stability in oil prices. How it works now is that every 3 months they meet and figure out what the demand for oil will be and adjust production based on that projection to maintain both a price floor and a price ceiling. Prior to this conflict that range was $70-80. Each member gets a share of that production. OPEC hasn't always been successful in policing member countries who have at times exceeded their production targets and also lied about production cuts.
Gulf countries now are utterly dependent on US arms to maintain their (typically unpoular) despotic regimes (usually monarchies). The UAE is particularly belligerent here. I view Dubai as a cleaner, shinier Mos Eisley. The UAE is directly responsible for the genocide in South Sudan. US arms are diverted to the RSF in exchange for illegally smuggled gold to Duabi that gets laundered via Switzerland [1]. Dubai is a terrible place.
Beyond Russia's rise as a major energy exporter, the US also became one in the last 15 years, particularly in 2015 when the export ban was lifted on crude oil (which had been there since the 1973 oil shock). OPEC countries are generally unhappy about this development because every barrel the US exports tends to be 1 barrel OPEN doesn't. But they're also largely powerless to do anything about it.
The Iran War is a massive strategic blunder by the US because it's shown the US has been unable to stop Iran from closing the Strait of Hormuz despite spending $1T+ a eyar on its military but, just as bad, it's shown that the US cannot or will not defend GCC countries or even its own bases in those countries from Iranian counterattacks.
Foreign countries generally pay for US bases as part of a broader security agreement and the idea of joint responsibility for security guarantees. But what if those guarantees are essentially worthless? This will completely reshape the US relationships with GCC countries. The UAE is really just the first domino to fall.
Short-term this smells like the US is either behind this break or at least approves of it. The idea is probably for the UAE to increase production in an effort to stabilize oil prices. This administration has also shown a complete disregard for historic alliances (including NATO) and they probably view OPEC as a cartel they want to break up. But I think this will long-term further destabilize the region and I wouldn't be surprised if some of these governments end up falling or at least break security ties with the US.
If anything, GCC countries will likely see China as a more reliable and stable trading and security partner as a result of all this.
> Short-term this smells like the US is either behind this break or at least approves of it. The idea is probably for the UAE to increase production in an effort to stabilize oil prices. This administration has also shown a complete disregard for historic alliances (including NATO) and they probably view OPEC as a cartel they want to break up.
I've seen reporting over the past week or so regarding the US potentially bailing out the UAE to make up for the financial harm and damage it's suffered due to the US-Iran war. How likely do you think it is that the UAE leaving OPEC is a condition for that financial assistance?
The UAE has some facilities to export on the outside of the Gulf and they can ship I believe ~1.8Mbpd on the ADCOP (Abu Dhabi Cross Oil Pipeline). That's only a fraction of their 4-5Mbpd production and I'm sure they're already using it so short-term I don't think it matters so much.
But when the Strait does open, which will happen eventually, the UAE will probably go to town so to speak, exporting well above what they might've otherwise as an OPEC member.
My suspicion is that this is what the UAE's move is really about and whY I think the US is giving at least tacit approval if they're not outright behind it.
Leaving OPEC right now means little short-term with so much production shut-in. Long-term, the UAE may cease to exist if this war goes on. Its population is 80%+ guest workers, it's totally dependent on desalination, food imports, and oil/gas exports and is incapable of defending itself on its own.
Context:
(1) “The United Arab Emirates,” today “made a shock request of [Pakistan] — repay $3.5bn immediately” [1].
(2) Saudi-Emirati relations were at an all-time low before the Iran War [2]. (Saudi Arabia just bailed Pakistan out of its Emirati loan. Saudi Arabia and Pakistan agreed a mutual-defence treaty last year [3].)
Put together, we’re seeing an Emirati-Israeli axis emerging to balance Saudi hegemony in the Gulf and Iranian hegemony over the Persian Gulf. I’d expect to see an Emirati deal with Egypt and India next if this hypothesis is correct.
What I don’t yet see is the ambition of the endgame. Is it Saudi Arabia backing off in Africa? Or is it seizing the Musandam Peninsula, islands of the Strait and possibly even territory on the other side?
[1] https://www.ft.com/content/99073d6e-4b57-417f-88fb-7a2c0e55e...
[2] https://www.nytimes.com/2025/12/30/world/middleeast/yemen-sa...
[3] https://en.wikipedia.org/wiki/Strategic_Mutual_Defence_Agree...
Someone's going to have to provide me with an explainer of how many different proxy forces are involved in Yemen. I can barely keep up with Lebanon and have forgotten Syria.
> an explainer of how many different proxy forces are involved in Yemen
RealLifeLore has been doing a decent job covering it [1].
The broad summary is you have the Saudi-backed unity government, the Iranian-backed Houthis, who claim all of Yemen but practically want North Yemen, and the UAE-backed STC, who also claim all of Yemen but practically want South Yemen. Emiratis bring the Israelis to the party. The Iranians bring the Russians. The Saudis bring various international elements (I know less about them than the Houthis and STC).
[1] https://m.youtube.com/watch?v=IgD7zmJN3_A&pp=0gcJCVACo7VqN5t...
Johnny Harris has a pretty decent video on the topic as well
https://www.youtube.com/watch?v=qsO-rULEfrk
Best of luck! These proxy wars have existed since the days of Assyria. 3000 years and running.
Kind of depressing thought actually.
I think there are only 3. Houthis (iran), PLC (saudi), and STC (UAE).
I guess Al-Qaeda and Isis are also there.
On whose side is Turkey? Or is it charting its own path?
It’s doing its own thing, mainly in Syria, Libya, and Somalia afaik.
Turkey supports ISIS and al Nusra.
No it doesn't.
In the Middle East everyone fights with everyone else and everyone is in covert or open alliance with everyone else. Simultaneously.
And for extra fun, the U.S. sometimes likes to jump into the fray.
The US is more of a bouncer on behalf of Israel than anything else, really.
Sometimes?
Every ~10 year or so. As opposed to the locals who experience it daily, either war or the conflicts-between-wars.
You are missing this interesting, and confidential until now, deployment of Israeli forces in UAE:
"Israel sent "Iron Dome" system and troops to UAE" - https://www.axios.com/2026/04/26/israel-iron-dome-uae
Also...their central bank governor quietly asked the US Treasury for a dollar swap line...Combined with the Pakistan $3.5B recall and OPEC exit, that is three coordinated moves of a cashflow stressed country...and of course the US is being asked to extend taxpayer backed dollar credit to the same royal family that bought 49% of Trump's crypto company four days before inauguration...
https://fortune.com/2026/04/19/uae-talks-us-possible-financi...
As I recall, it was Saudi Arabia that largely bank rolled Pakistan's "not party to the Nuclear Non-Proliferation Treaty" weapons program [Ω](?) .
[Ω] https://en.wikipedia.org/wiki/Pakistan_and_weapons_of_mass_d...
So there's that.
We all live in a yellow cake submarine..
Its a pakistani submarine, with exclusive saudi-royalty members on the bridge.
We should build a city that is a statistical bunker- basically a line, for the edge case of jihadist insurgents getting the forbidden eggs in the cake.
> ... bank rolled Pakistan's not party to ...
They bank rolled Pakistan's not party to the treaty? Sorry I can't parse this sentence.
Did you munge two sentences i.e. Saudi Arabia bankrolled Pakistan's nuclear weapons, and also Pakistan is not party to the treaty?
My bad, it's late in the evening here and I typed something that works when spoken with emphasis and timing (at least in my head).
I added quotes, it should say that Pakistan's weapons program is one that is outside the Nuclear Non-Proliferation Treaty as Pakistan is not a party to it.
> Put together, we’re seeing an Emirati-Israeli axis emerging to balance Saudi hegemony in the Gulf and Iranian hegemony over the Persian Gulf. I’d expect to see an Emirati deal with Egypt and India next if this hypothesis is correct.
Don't Egypt and Israel hate each other though? Could UAE feasibly align with both?
Virtually all Arabs hate Israel but Arab governments are more varied. The modern Egyptian state is oriented toward close partnership with the US, and a large part of that was peace with Israel post '73.
So yes, the UAE could align with both.
All Arabs? Including the ~20% or 2 million Arabs who are Israeli citizens, enjoying religious freedom and all other liberties of a modern democracy?
They're not buddies per se, but Egypt was the first ME country to normalize relations.
They've also been cooperating on blockading Gaza for a couple of decades. Israel gets most of the attention for that, mostly rightfully so, but people seem to forget that there's a border with Egypt too and that has also had very limited access.
Egypt learned on other's mistakes for once. They saw how Jordan welcomed Palestinians on their land and they repaid the kindness by launching a coup against the government in 1970. No wonder not a single anti-Israeli coalition country is willing to deal with Palestinians directly at their own home and are keeping borders watertight :) .
To be fair, part of the peace deal between Egypt and Israel gave Israel some control over the crossing, and they seized it entirely during the war.
https://en.wikipedia.org/wiki/Rafah_Border_Crossing
> The Rafah crossing was opened by Israel after the 1979 peace treaty and remained under Israeli control until 2005...
> Under a 2007 agreement between Egypt and Israel, Egypt controls the crossing but imports through the Rafah crossing require Israeli approval.
This is to a large part to give Egypt plausible deniability. They don’t want to deal with Gaza, refugees, or a humanitarian crisis, but also don’t want the political fallout of taking action like the Israelis do.
Eh, 50/50. Israel would not respond positively to Egypt throwing the gates wide open.
That is very reductive of the whole situation. The Egyptians are not singularly focused on helping Palestinians; it is far more nuanced than that.
Bottom line, Egyptians are not interested in supporting millions of refugees inside their border. So the border stays closed to mass immigration.
All that may be true.
Also true: If Egypt opened the border and Israel objected, Israel would take swift military action.
At the same time, neither would Egypt. Refugee crisises are messy.
People don't forget it. But Egypt is a dictatorship aligned with US/Israel, so there's again not much we can do there. Ending foreign aid to Egypt is probably very aligned with ending foreign aid to Israel in terms of popularity among American voters
> Ending foreign aid to Egypt is probably very aligned with ending foreign aid to Israel in terms of popularity among American voters
I strongly suspect the average American has absolutely zero sense of how much foreign aid we give Egypt. That's not to contradict your point directly, just that it isn't a very salient part of American politics (unlike Israeli foreign aid).
> it isn't a very salient part of American politics (unlike Israeli foreign aid).
I feel like Israeli aid, while vastly more salient than it used to be, is still mostly salient as a left-of-center wedge issue, otherwise being about as salient as your average major foreign policy issue - ranking just under the least salient domestic policy issue, which ranks just under the most minor personal quality of any candidate, which ranks under the current state of the economy, which ranks under the current perceived state of the economy. Wow, that's way too many times to use "salient" in one sentence.
And for the record, I'm not arguing about how much people should care, just how much they do.
Egyptians and Israelis hate each other, not their governments. They're on friendly terms relatively speaking.
If Egypt were a democracy, its government would hate Israel. That's why the current dictator overthrew the last democracy and had its elected leader die in jail, and that same dictator is now supported heavily by US funding
The briefly elected Muslim Brotherhood government of Egypt was .. not as liberal as the Tahrir Square protests demanded.
And the UAE played a large role in covertly supporting the movement that toppled it.
> Egypt
Already aligned with the KSA [0]
> India
Already aligned with the UAE [1]
---
IMO the Pakistan aspect is overstated. This is a reversion to the norm of KSA-Pakistan relations before Imran Khan completely destroyed it by fully aligning behind Qatar and Turkiye when both were competing against KSA.
[0] - https://www.aljazeera.com/news/2026/1/5/egypt-says-it-shares...
[1] - https://thediplomat.com/2026/01/india-uae-embark-on-a-strate...
> Egypt is aligned with the KSA
It’s complicated [1]. My low-key guess is cutting off Pakistan was intended to send a message to Cairo.
> Already aligned with the UAE
Aligning. To my understanding there isn’t a treaty yet.
> the Pakistan aspect is overstated
Pakistan isn’t the cause. It’s the canary. These moves happening in quick succession (strategically, over the last year, and tactically, in the timing of these announcements) speaks to previous assumptions being fair to be questioned.
[1] https://www.washingtoninstitute.org/policy-analysis/egypts-t...
> My low-key guess is cutting off Pakistan was intended to send a message to Cairo
Abu Dhabi and Cairo have been misaligned for years since the Sudan Civil War began (UAE backs the RSF and KSA+Egypt back the Army) as well as the UAE backing Abiy Ahmed in Ethiopia at the expense of their traditional partner KSA.
> To my understanding there isn’t a treaty yet.
This is as close as it will get. New Delhi doesn't "sign" defense treaties unless pushed to a corner, because it reduces maneuverability.
The Pakistan-KSA alignment was already cooking after IK was overthrown. I think I mentioned it before on HN (need to find the post I wrote) but given the primacy Pakistan has had in US-Iran negotiations well before the war as well the PRC's increasingly miffed attitude at Pakistan following the CPEC attacks, the US most likely brokered a back-room realignment between PK and KSA.
A neutral-to-ambivalent India with a pro-America Pakistan is better for the US than a completely aligned India with a pro-China Pakistan.
TODO: citations
[delayed]
My guess is that is this because UAE has ports on the other side of Hormuz and doesn't want to be restricted in their usage by OPEC? Does this mean UAE thinks Hormuz will be a problem for a long time? And what does it mean for oil prices long term?
> My guess is that is this because UAE has ports on the other side of Hormuz and doesn't want to be restricted in their usage by OPEC?
Does OPEC limit that? It would be very surprising to me if they did, as the point of opec is only to limit production when oil prices are low. They aren't low right now.
Besides, nobody actually follows the OPEC limitations.
That would also explain why UAE is oddly in favor of a war in their region.
Oman benefits significantly more from the war in Iran than the UAE, but is the most favorable country towards Iran in the GCC. See the visual here: https://archive.is/Xt3gd
Saudi Arabia and the UAE have been urging the US to bomb Iran since 2015 for their own non-oil reasons. They see political Islamism as a strategic and domestic threat. That's why they had Qatar under a blockade for a number of years. Iran is their biggest rival, exporting militancy to Yemen - the Houthis who UAE and Saudi Arabia battled for a number of years last decade. A number of attacks on Saudi and UAE oil and gas facilities from Iran Quds-backed militant groups in Iraq across 2019-2022. None of this makes the news in the West.
UAE's major issue with Saudis is their quiet support for Islamism as well. They know countries like Iran exploit for it like a wildcard which always backfires and destabilizes the region, which is bad for business.
No. The UAE’s major issue is that KSA has finally awoken from its deep nonsensical slumber (I can elaborate further if there is interest).
This is a battle of economies and regional influence.
They are a wannabe Israel, a bad faith actor sowing chaos for geopolitical advantage. They've been spending money on Washington lobbyists to advocate for this war for a long time. And this isn't the only skulduggery they've been up to. They've supported the warlord Haftar in Libya and the genocidal RSF militia in Sudan.
They've hired American mercenaries to assassinate Islamist civil society figures in Yemen. They pay European right-wing influencers to spread anti Muslim content (yes you read that right). They are the buyer for conflict gold coming from the Congo. In short they are a problem.
The UAE has the ADCOP (Abu Dhabi Cross Oil Pipeline) to move oil to beyond the Strait. It has a capacity of ~1.8Mbpd (million barrels per day) so is only a fraction of the UAE's total oil exports and a tiny fraction of the oil exports impacted by the Strait being closed. It's also being used already. I don't know how these particular oil exports have been impacted. They are beyond the Strait but not by that much. Iran is still entirely capable of harassing shipping there.
I believe the US has given tacit approval or is behind this move entirely for what comes when the Strait inevitably reopens and that is to get the UAE to export well beyond what they might otherwise as an OPEC member.
The UAE like most GCC countries is entirely dependent on US arms to maintain their regime so I simply cannot imagine them doing this without the US putting them up to it or looking the other way.
> ~1.8Mbpd (million barrels per day)
Mbpd = thousand barrels per day, MMbpd = million barrels per day
They might be leaving either for a) price independence or b) currency flexibility.
OPEC doesn’t enforce currency or monetary policy rules.
Do they? I just looked at a map and I see very little oil infrastructure on that side of Hormuz plus isn't Oman Iran aligned?
No expert but I always got the impression Oman was a neutral party. They help run the Hormuz with Iran but largely neutral in world politics.
It also looks fairly easy to mine/blockade outside of their territorial waters. You don’t need that many drones to make the whole area unusable for marine transport. The strait is the clearest choke point but I don’t know how much bypassing it would help UAE
You don't even need to hit that many ships either.
Despite there being way less than 1 successful attack per week [1] travel through the Red Sea is down from ~500/week to ~200/week [2].
[1]: https://en.wikipedia.org/wiki/Houthi_attacks_on_commercial_v...
[2]: https://en.wikipedia.org/wiki/Red_Sea_crisis#Houthi_attacks_...
They do, it's only like 1-2 million barrels a day in capacity right now.
Fujairah, on the other side of Hormuz is the fourth largest bunkering hub in the world. That’s not “little oil infrastructure”
Oman is the Switzerland of the Middle East.
As democratic popular opinion turns against classical liberal economic principles, many theocratic or monarchist hell holes are increasingly becoming the unexpected underdog turned winners in economic freedom. It's been fascinating to watch.
My understanding is that unique historical, cultural, and even geographical factors have led to this outcome for Oman. I would encourage you to read up on the history of the country to understand the nuance here and not paint with such a broad brush.
Everyone has a unique "..." and a nuance here and a nuance there.
UAE has a unique yada yada and also ended up with a surprisingly remarkably free economic index despite being a theocratic monarchy.
As did the monarchy Lichtenstein, British controlled Hong Kong, and the one-party state of Singapore (technically democratic, in practice it functions like a recallable monarchy).
Also of note the three richest countries by GDP PPP per capita are Monaco (hybrid monarchy with monarchist veto powers), Lichtenstein (hybrid monarchy with monarchist veto powers), Singapore (single party state).
I'm not sure what the conclusion is from this other than that the wealthy love having an autocratic tax haven microstate to park the money they earned from liberal democracies in.
This is true, but these countries aren't doing it for the benefit of foreigners, they're doing it for the benefit of themselves.
You should visit Fujairah ! Huge facilities there.
https://en.wikipedia.org/wiki/Habshan%E2%80%93Fujairah_oil_p...
The UAE was talking about getting a credit swap line from the US. It could be the condition.
Or it is also part of a long term plan of the US to control all energy routes. It will keep Hormuz closed and try a new pipeline via the UAE to the Gulf of Oman.
Fragmentation of the energy producers is another goal. New Alaskan LNG projects have been approved and are all the rage among senators:
https://xcancel.com/alaskalng
A happy coincidence:
"Alaska LNG will deliver vital #EnergySecurity for our military and allies in the Pacific. Thank you @SenDanSullivan for your continued engagement and advocacy."
The US would control the following:
- Baltic sea via pipeline threats.
- Corridor from the Caspian sea from Azerbaijan through Armenia to Turkey.
- Venezuela.
- UAE corridor to the Gulf of Oman.
Probably much more than that. Grabbing the Arctic route via Greenland has failed so far.
Serious question: what is OPEC’s influence in 2026? Most analyses I’ve read suggest that it’s essentially a defunct organization and has been since the 1980s, due to (1) a lack of geopolitical agreement between members, and (2) a lack of punishment/compensatory mechanisms for when individual members cheat on their commitments.
It's a good question. Let me answer the question this way: OPEC is the biggest single factor for the inflation shock of 2020 to 2022 yet weirdly hardly anybody talks about it.
Let's rewind to March 2020 and the start of the pandemic. For a very brief period, April oil futures went negative. Technically, this was an extreme contango market. Oil producers were running out of places to store oil and nobody was buying.
For some more background, OPEC tries to maintain oil price stability. If it gets too low, they don't make enough money. If it gets too high it creates political instability and jeopardizes security relationships with the US and Europe. So every 3 months OPEC meets and looks at oil supply and the projected demand and they adjust production to maintain a price floor and a price ceiling. Before the war this was typically $70-80. In years past it might've been $60-70. They don't always succeed because of exteranl factors, unforeseeable changes in demand or even just member countries lying about production or production cuts.
So in April-May, the then Trump administration went to Saudi Arabia to get them and OPEC to cut oil production [1][2][3]. Instead of the 3 monthly reviews which would've naturally cut production anyway to maintain the price, Trump browbeat MBS into a 2 year production cut, initially 9.7Mbpd (million barrels per day) and then reducing over time to I believe 6.3Mbps [4].
This was a disastrous deal. You can overlay a chart of the 2 year deal and global inflation and they match up pretty much exactly.
The Biden administration quietly went to MBS and asked him to end the deal. He refused. There are historical reasons for this, namely that the US (under Trump) had kinda screwed Saudi Arabia over in 2015, 2017 and 2018 but I digress.
So in the US the politics of this were that Republicans were going to pin this on Biden (even though it was a Trump deal) and the Democrats were never going to blame Saudi Arabia. Instead it was just "oil companies are greedy and bad" from a pure short-term politics POV. Nobody brought up the 2020 OPEC deal. And that's wild to me. It just goes to show that US foreign policy is uniparty and a Democratic administration was never going to publicly split with an ally like Saudi Arabia.
So does OPEC matter? Well they were instrumental in enforcing that deal. So you tell me.
[1]: https://www.reuters.com/article/economy/special-report-trump...
[2]: https://www.reuters.com/article/business/opec-russia-approve...
[3]: https://www.reuters.com/business/energy/opec-would-miss-frie...
[4]: https://www.reuters.com/article/us-global-oil-saudi-cuts-idU...
OPEC doesn't adjust production. They set production targets, and then most of the members cheat. For geological reasons it's not even really possible to significantly reducing production on many oil wells without damaging them. Saudi Arabia generally has more freedom to throttle production up or down than other OPEC members.
That really does highlight how badly the US is a controlled petrostate, and how different that is to past events where the US goes around demanding that OPEC raise production.
You have another thing which is that MBS (correctly) felt comfortable ignoring Biden. If he'd slighted Trump in that way it would probably take 2 private jets to undo the damage.
Biden was ready to take on the Saudis and then Russia invaded Ukraine...
I see this as a temporary action to contain oil prices, orchestrated by the US.
I expect UAE to send signals that they will increase production considerably once situation allows.
Whenever oil prices surge or 10Y yield touches 4.4% we get some action to contain them.
> I see this as a temporary action
Unlikely. Out of OPEC’s twelve members [1], one is controlled by Trump, one—the third largest—is bombing the UAE and the other—the absolute largest—is on the other side of every proxy war the Emirates are invested in. As a multi-lateral organization it’s about as fucked as BRICS.
[1] https://en.wikipedia.org/wiki/OPEC
The cartel can't even self police. These are like climate pledges.
> since the 1980s [OPEC] largely failed to achieve its goals [...]
> members have cheated on 96% of their commitments.
> One large reason for the frequent cheating is that OPEC does not punish members
Great news, I hope this will finally crash russia, just like the same events back in the 80s caused soviet empire collapse.
Is there an explainer on this? I'm not familiar with the geopolitics or oil cartels well enough to understand the implications here.
My understanding is basically that OPEC is similar to a workers union. Countries band together and set terms that dictate the price and the supply available in the market.
UAE leaving OPEC is like breaking up a workers union. UAE is no longer required to restrict how much oil it exports, and also doesn't have to set a price floor. They're allowed to sell more oil cheaper, potentially at the expense of neighboring OPEC countries.
Which to me sounds like a good thing for the rest of the world?
Ordinarily a Cartel is illegal. If say the US breakfast cereal manufacturers decided to all agree they'll charge a minimum $20 per kilogram, no bulk discounts, the government can and likely will (assuming they don't remember to bribe Donald Trump) prosecute them and force them to stop doing that.
If you've been involved in an SDO ("Standards Development Organisation" think ISO or the IETF although the IETF would insist that they are not in fact an "Organisation" they will admit to being in effect an SDO) you've probably at least glanced at documents explaining that you absolutely must not do anything which looks like Cartel activity, you can't use the SDO to agree prices, or to cut up territory or similar things. The SDO's lawyers will have insisted they make sure every participant knows about this because they don't want to end up in prison or worse.
However the trick for OPEC is that it's a cartel of sovereign entities. It can't be against the rules because its members are the ones who decide the rules. So Chevron and Shell and so on cannot be members of OPEC but the UAE and Venezuela can.
Breakfast cereal has substitutes so it would be unprofitable to do that. But the meaning behind what you're saying was clear nonetheless.
There is no substitute, gotta have my pops.
> Which to me sounds like a good thing for the rest of the world?
It probably isn't a bad thing, but let's not overestimate the beneficial effects. The reason oil prices are high right now isn't because of cartel fuckery, it's because of Trump and his war. And oil supply chains are in such chaos because of Trump's war that even if it ended tomorrow it would take markets multiple years to return to a pre-war state.
The bottom line is that oil prices are going to be elevated for years to come, and when oil prices are high, OPEC has nothing to do other than sit back and collect the profits. And thanks to the ongoing solar revolution, oil's days as the world's predominant geopolitical poker chip are numbered; by mid-century OPEC won't be relevant anyway.
By mid century, worldwide fossil fuel usage will be higher than it is today. Solar will take over some of the electricity production including transportation but in the overall energy mix it will largely be a supplement, not a replacement. Total per capita energy use from all sources will continue to increase at a rapid rate.
> By mid century, worldwide fossil fuel usage will be higher than it is today.
Even if this turns out to be true, it would be irrelevant. The reason that oil occupies the geopolitical role it does today is because of its potential to rapidly bring the entire developed world to a halt. Oil will always be in demand because of its many useful applications (and this demand may even grow in absolute terms despite declining per-capita consumption, because the global human population is projected to continue increasing well into the latter half of the century), but as an energy source, by 2050 it will have so many highly-available complements that an oil cartel will be as relevant as a potato cartel.
The potato cartel seems to be at least somewhat effective.
https://www.cbc.ca/news/world/potato-cartel-fries-tater-tots...
That’s similar to unions in general, but of course workers unions was the first thing out of the hat.
The basics are the same as any other cartel. OPEC states cover enough of the supply-side of the market to be able to keep prices artificially high.
UAE leaving means UAE can price below OPEC's target and take more of the market. OPEC will have to react and lower prices or concede some of the market.
Does any of this matter if the major players can't ship oil through Hormuz? Who knows...
OPEC was never a very effective cartel in the first place. Many of the members routinely exceeded production targets. And for geological reasons it's not like most oil wells can even be throttled down.
OPEC is a cartel of Arab oil-producing countries, including UAE. They limit production in order to keep the world oil price artificially high. UAE is pulling out of the cartel, presumably so it can bypass the restrictions and cash in on the high prices caused by the Iranian conflict. AFAIK this is the first time a country has pulled out of OPEC, and hopefully, it will lead to its demise.
> OPEC is a cartel of Arab oil-producing countries
"In 1949, Venezuela initiated the move towards the establishment of what would become OPEC, by inviting Iran, Iraq, Kuwait and Saudi Arabia" ...
> OPEC is a cartel of Arab oil-producing countries, including UAE.
Nigeria joined OPEC in 1971.
> its demise.
OPEC or UAE?
OPEC
The very short explanation is that they kind of want to be not-Saud and has trouble cooperating with Saudi Arabia for a rather long time, not just over fossil fuels but also in Yemen.
Recently the UAE faction in Yemen was forcefully reined in by the house of Saud, and OPEC kind of prioritises different things than the UAE, i.e. not pushing profits hard in the short to medium term instead focusing on stability and predictability.
Currently the saudis are trying to resolve the Hormuz issue and the attack on Iran through diplomacy, which the UAE is not exactly fond of and would rather see a violent solution. In part this is coloured by the close relation between the UAE and Israel, both of which share the view that running militant factions in failed states is preferable to orderly international relations between sovereigns. The saudis aren't as keen on this type of foreign policy and in other aspects also not as friendly with Israel as the UAE.
The UAE has been signaling that they don't really want to be a part of OPEC since at least 2020 or so. Them actually leaving was to be expected, the question should have been 'when' rather than 'if'. Iranian retaliations on the UAE and subsequent damage to the reputation of mainly Dubai and Abu Dhabi as well as capital flight probably strengthened the UAE politicians longing to get out of OPEC and start pumping and selling at full capacity to try and make as much money as possible as fast as possible.
If the UAE does not do this it'll be more exposed to credit and currencies besides the US dollar, which they probably find rather inconvenient.
Didn’t we see reports that Saudi Arabia was supporting and pushing Israel and U.S. to attack Iran?
That was "anonymous sources".
The goal is a full regional war orchestrated by Israel. That's what is playing out here.
Slowly weakening remaining Arab states and setting them up to fight each other.
The various Arab tribes or kingdoms had a long and bloody history of fighting each other going back before Israel even existed.
This is how peak oil happens. Without a healty cartel, oil is doomed. Solar, wind, geothermal, hydro, nuclear. These are more than ripe to disrupt energy into the 21st century.
> Without a healty cartel, oil is doomed
Why/how?
Without a healthy cartel, wouldn't prices go down? Cheaper oil means less adoption of alternate energy sources.
The goal of the cartel was to stabilize prices right in the sweet spot to keep the world addicted. Too low and players start losing money, too high and people switch away from oil, too much volatility, and people switch away from oil.
> The goal of the cartel was to stabilize prices right in the sweet spot to keep the world addicted.
If the price of oil remains low the gulf governments can't fund their social programs and risk instability. That may not be the only reason for OPEC but it's a major one.
When fracking really took off the writing was on the wall and I think many OPEC nations have since taken serious measures to shield themselves from price drops. This is probably why the UAE can now feasibly leave OPEC. I thought the fracking boom was the end of OPEC but they managed to hang on. I do know that fracking put a price ceiling on oil. Shocks aside, like the Iran war, once oil gets in the $80-90/bbl range (if not lower) fracking becomes profitable and that capacity comes back online. I've driven through Big Spring TX and the Permian Basin, it's all right there ready to go. They're just sitting on it until it makes money pulling it out of the ground.
> Too low and players start losing money
Only the non-competitive ones. That's how competition works.
OPEC would be deemed an illegal anti-consumer price fixing scheme under the laws of any country with even the most basic of anti-trust laws, if not for the fact that its entirely composed of sovereign countries not subject to any law but their own.
If the price is too low and fields stop being exploited because they're unprofitable, you reduce the volume produced each day. That means there's scarcity with a low price, and you're back at trying to switch en energy source because you just can't get oil.
That moves prices upward, because people are willing to pay more, but increasing production is not like turning the faucet in your home. It takes time. This is the instability of oil production that OPEC tries to prevent, to keep the world hooked on readily available just cheap enough oil.
In a free market "scarcity with a low price" is a contradiction. If there's scarcity the prices will be high, not low. And nobody's going to be reducing production if the prices are high.
> instability of oil production that OPEC tries to prevent
First of all, if the goal is to prevent instability OPEC is doing a terrible job. Secondly, a cartel is not needed to prevent price instability, as demonstrated by the hundreds of other commodity markets around the world which are not controlled by cartels engaging in price fixing schemes.
As with any cartel, the purpose of OPEC is to maximize profits for its members, artificially fixing the price of oil at a level higher than what it would otherwise be in a free market not controlled by a cartel. Price stability is a side effect of that, not the goal.
A healthy cartel means consistent oil prices. Without it, oil may average cheaper over the long term (and almost certainly over the short term), but there will be a lot more variance.
Ok? If you can’t have price variance buy futures. Price variance doesn’t matter for consumers, just average price.
I guess the silver lining from this mess is that maybe some more governments realize they don’t want their energy policy to force them into a recession every time there’s a conflict in the Middle East
how is the cartel not healthy? uae is 12%
> Solar, wind, geothermal, hydro, nuclear. These are more than ripe to disrupt energy into the 21st century.
Yes and we've seen negative electricity price in some EU countries a few days ago: very sunny days but not too warm, perfect for solar panels. Supply surpassing consumption: negative electricity prices.
While we're, supposedly, living through an energy crisis. There may oil shipment issues and there are issues with energy due to the Russia/Ukraine war too but... Many already understood that there were solutions to not be entirely dependent on oil.
Doomsayers are going to argue that "we need electricity during the winter at 6 pm" so a "largely negative electricity on a sunny sunday means nothing" (Belgium, two days ago: hugely negative electricity prices, for example and it's not the only case) but the truth is: we're not anywhere near as dependent on oil as we were during the Yum Kippur war / 1973 oil shock.
And oil is definitely limited in how high it can go for as soon as it goes up, suddenly other energy source make more and more sense economically.
Once again: negative electricity prices two days ago. Let that sink in.
The problem is that grid scale power plants can't just turn on when the sun isn't shining. If the negative prices during the day and positive prices at night lead to energy storage, then it's a solution. Otherwise, it's just a glut at some times of day.
This is where grid scale batteries come in. Looking forward to that. (As long as they can avoid blowing up like the one in Monterey…)
Okay this I did not see coming... If it actually happens it's going to cause a alot of ripple in the energy market. Good or bad? Hell if I know.
They represent 4.5% of oil production it seems. It will be interesting to see what this means longterm.
"Oil" is not a homogeneous thing. There are different grades of oil and refineries are built to process specific grades of oil. UAE produces the so-called "Dubai Crude" oil grade, which is very sought after.
Probably not much unless others follow suite.
It could be the first domino. They do have a port on the Gulf of Oman fed by a pipeline from their major fields well inland. This may turn out to be minimal for the world, but it could be huge for the UAE and their major customers.
4.5% most likely capped to meet OPEC agreements. There's no ceiling now (although, it will obviously not be 100% or even close).
Is this as a function of the Iranian war?
I think they just want to pump as much as they possibly can to cash out now while they can.
The writing is on the wall for fossil fuels. Even _they_ are doubling down on solar power and switching away from fossil fuel.
https://en.wikipedia.org/wiki/Solar_power_in_the_United_Arab...
They also build out more nuclear power than all of the west comnined: https://en.wikipedia.org/wiki/Barakah_nuclear_power_plant
Earth is going to run out of oil in 50 years at current rates. One way or another, the status quo is going to change.
The world will never run out oil supply, demand will likely go first.
There are dozens of ways to increase production through world peace, better drilling technology and ideological conversion. Most of African production is well below geological potential (Libya being the easiest example, but also applies to Nigeria and the DRC etc). European shale is barely investigated, Russia is restricted by sanctions, the Middle East by war. Antartica and the Falklands are relatively unexplored but feasible.
However, the electrification of transport will erode demand in everything besides heavy shipping and jet fuel. Without that demand oil prices will crater.
> The world will never run out oil supply, demand will likely go first.
Not sure I buy that. Oil will still be in demand as a chemical feedstock. In fact, there are already people saying that oil is too precious to use as a fuel.
Some oil fields also produce Helium. That's actually an element we don't have plenty of anyway. But most don't do that, the toxic black goop they're producing is almost all just a mess of Hydrogen + Carbon chains. Similarly "Natural gas" ie Methane is just CH4.
If we have plenty of energy anyway we can just make exactly what we need, no need to drill for a mix of pot luck hydrocarbons. If we don't have enough energy anyway then we're burning hydrocarbons to get energy and we might as well use them as a feedstock too.
Oil will only be in demand as a chemical feedstock as long as it's economically competitive with the alternatives. There's a substitute for virtually every petrochemical process if oil becomes scare (or expensive) enough.
Substitution is highly impractical in the short term but in a conversations of decades/centuries it's significant. Venezuela's reserves alone could run the world's petrochemicals for 60 years (Gemini) so it's a realistic perspective. Together with other proven reserves we could be okay for centuries.
Recycling is sometimes an option too.
The prediction has been "by around 2050" since forever¹. Any time people find a way to increase reserves, flow rate increases to compensate, and the prediction stays approximately the same.
That's to say, I think you forgot to update your number when time passed.
1 - time started at the 1970s, that's a well known fact
No it isn't!
UAE/Saudi tension over quotas predates it by years, but certainly gave a good excuse to execute leaving.
Worst case for the Middle East - OPEC is disolved.
To anyone wondering, yes this is a consequence of the War in Iran but what this means isn't exactly clear. Or rather the consequences aren't clear.
For a super brief background, the US has what's been called an oil-for-security deal with Saudi Arabia since 1945. The US supports the Saudi royal family and Saudi Arabia keeps the oil flowing, which has largely been the case (other than 1973). Saudi Arabia remains the "big dog" in OPEC. OPEC+ is really about Russia even though it also includes Kazakhstan and Mexico. Russia became a major oil producer and exporter in the last 20-30 years.
OPEC generally likes stability in oil prices. How it works now is that every 3 months they meet and figure out what the demand for oil will be and adjust production based on that projection to maintain both a price floor and a price ceiling. Prior to this conflict that range was $70-80. Each member gets a share of that production. OPEC hasn't always been successful in policing member countries who have at times exceeded their production targets and also lied about production cuts.
Gulf countries now are utterly dependent on US arms to maintain their (typically unpoular) despotic regimes (usually monarchies). The UAE is particularly belligerent here. I view Dubai as a cleaner, shinier Mos Eisley. The UAE is directly responsible for the genocide in South Sudan. US arms are diverted to the RSF in exchange for illegally smuggled gold to Duabi that gets laundered via Switzerland [1]. Dubai is a terrible place.
Beyond Russia's rise as a major energy exporter, the US also became one in the last 15 years, particularly in 2015 when the export ban was lifted on crude oil (which had been there since the 1973 oil shock). OPEC countries are generally unhappy about this development because every barrel the US exports tends to be 1 barrel OPEN doesn't. But they're also largely powerless to do anything about it.
The Iran War is a massive strategic blunder by the US because it's shown the US has been unable to stop Iran from closing the Strait of Hormuz despite spending $1T+ a eyar on its military but, just as bad, it's shown that the US cannot or will not defend GCC countries or even its own bases in those countries from Iranian counterattacks.
Foreign countries generally pay for US bases as part of a broader security agreement and the idea of joint responsibility for security guarantees. But what if those guarantees are essentially worthless? This will completely reshape the US relationships with GCC countries. The UAE is really just the first domino to fall.
Short-term this smells like the US is either behind this break or at least approves of it. The idea is probably for the UAE to increase production in an effort to stabilize oil prices. This administration has also shown a complete disregard for historic alliances (including NATO) and they probably view OPEC as a cartel they want to break up. But I think this will long-term further destabilize the region and I wouldn't be surprised if some of these governments end up falling or at least break security ties with the US.
If anything, GCC countries will likely see China as a more reliable and stable trading and security partner as a result of all this.
[1]: https://www.democracynow.org/2025/1/28/sudan
> Short-term this smells like the US is either behind this break or at least approves of it. The idea is probably for the UAE to increase production in an effort to stabilize oil prices. This administration has also shown a complete disregard for historic alliances (including NATO) and they probably view OPEC as a cartel they want to break up.
I've seen reporting over the past week or so regarding the US potentially bailing out the UAE to make up for the financial harm and damage it's suffered due to the US-Iran war. How likely do you think it is that the UAE leaving OPEC is a condition for that financial assistance?
how will they get the oil out of the Gulf?
The UAE has some facilities to export on the outside of the Gulf and they can ship I believe ~1.8Mbpd on the ADCOP (Abu Dhabi Cross Oil Pipeline). That's only a fraction of their 4-5Mbpd production and I'm sure they're already using it so short-term I don't think it matters so much.
But when the Strait does open, which will happen eventually, the UAE will probably go to town so to speak, exporting well above what they might've otherwise as an OPEC member.
My suspicion is that this is what the UAE's move is really about and whY I think the US is giving at least tacit approval if they're not outright behind it.
UAE is toast, it's glitter was just influencers and glass in the desert, resting on the flow of oil.
Leaving OPEC right now means little short-term with so much production shut-in. Long-term, the UAE may cease to exist if this war goes on. Its population is 80%+ guest workers, it's totally dependent on desalination, food imports, and oil/gas exports and is incapable of defending itself on its own.