The decision of the UAE to withdraw from OPEC causes tremors in the cohesion of one of the most well-known organizations of the global economy, removing a key producer from the bloc. This development highlights the growing mismatch between members that historically supported the cohesion of OPEC, mainly Saudi Arabia and the UAE.
At the core of this divergence lies a fundamental difference in strategic priorities. Saudi Arabia operates as the de facto stabilizing force within the bloc, prioritizing price management through supply discipline. Conversely, the UAE focuses on the economic exploitation of its production capacity, supported by investments to expand output.
In this context, the exit can be interpreted as an attempt to remove institutional constraints on production policy. This occurs at a time when the structural increase in demand in developing economies, due to urbanization, combined with the energy transition, provides incentives for faster economic exploitation of hydrocarbon reserves. Furthermore, by increasing production, the UAE aims to boost revenues to finance its ambitious public investment program.
The UAE’s decision aligns with the dynamics of oligopolistic systems. Specifically, according to Intermodal, when the gap between production capacity and allowed production becomes substantially large, the opportunity cost of remaining within quotas increases, due to the rising economic cost of unutilized production capacity. Geopolitically, the move reflects the UAE’s alignment with the United States and their positioning in an increasingly competitive global energy landscape. Although there is no formal coordination, a clear convergence is observed between the UAE’s strategy (driven by market share) and US efforts to strengthen their position in the energy market, indicating a more fragmented global oil supply system.
Source: Intermodal
