The decision by the United Arab Emirates to withdraw from OPEC marks a significant shift in the global energy landscape, with far-reaching implications for oil markets, geopolitical alignments and the future of cartel-based coordination, as experts agreed during a panel discussion at the Foundation for Defense of Democracies in Washington.
As they noted, what may appear at first glance as a technical policy decision is, in reality, the culmination of long-standing tensions within OPEC and a reflection of deeper structural changes in how energy power is exercised in the 21st century.
“This is an exciting development for both the region and for the United States and our opportunity to lead and cooperate ” said Richard Goldberg, Senior Advisor at FDD and head of its Energy and National Security Program, who previously served at the White House National Energy Dominance Council and the National Security Council, setting the tone for what many analysts view as a pivotal moment in global energy politics.
Goldberg framed the move within a broader transformation already underway. “We have a long-term strategic shift that continues in the US favor” he argued, pointing to a convergence of factors-from rising American energy production to deepening cooperation with Gulf partners-that are gradually eroding the traditional influence of OPEC. At the same time, he cautioned that this shift is unfolding alongside immediate instability. “We also have a short-term disruption in global supply causing a price spike that is having a domestic impact” he noted, highlighting the tension between long-term gains and short-term volatility.
Central to this instability is the disruption in the Strait of Hormuz, a chokepoint through which a significant portion of global energy flows. “We face still a disruption for traffic with roughly two-thirds of flow still interrupted from pre-crisis levels” Goldberg said. While alternative overland pipelines through Saudi Arabia and the UAE have partially offset the impact, the situation remains fragile. Yet even amid this uncertainty, Goldberg sees opportunity. Freed from OPEC constraints, the UAE could expand production and deepen coordination with the United States and other partners. “Sky’s the limit in where we could go in coordination in the oil market in the long term” he said.
For Goldberg, the implications extend beyond market mechanics to the architecture of global energy governance. The weakening of OPEC, he suggested, opens the door to a more flexible, US-aligned system.
“You have an incredibly strong pro-American, American-aligned energy coordination bloc” he said, describing a landscape in which traditional cartel discipline gives way to looser, strategically aligned cooperation among key producers. In this context, the UAE’s move is not an isolated decision but part of a broader shift toward a new order.
Bernard Haykel, professor at Princeton University, offered a complementary perspective, emphasizing the structural tensions that have long existed within OPEC. In his view, the UAE’s departure reflects deep divergences-particularly with Saudi Arabia-over both economic strategy and the future of oil itself. “It’s definitely a slap in the face of Saudi Arabia,” Haykel said, noting that Riyadh has historically functioned as the “central bank of oil” through its leadership of OPEC and OPEC+.
At the core of this divergence is a fundamentally different outlook on the energy transition. While Saudi Arabia has sought to manage production in a way that preserves long-term market dominance, the UAE has adopted a more aggressive approach. “Their view was this energy transition is likely to happen a lot faster and that you would end up with demand destruction much sooner for oil” Haykel explained. “So therefore, let’s go all out on our production and no matter what the price, let’s make a buck now.”
This strategic difference has had tangible consequences. The UAE has invested heavily in expanding its production capacity, yet OPEC quotas have limited its output. According to Haykel, the country has been producing “well under its actual capacity” effectively leaving significant volumes untapped. Meanwhile, other members have failed to adhere to agreed limits. “There were notorious cheaters Iraq and others,” he said, adding that these dynamics fueled frustration in Abu Dhabi.
Looking ahead, Haykel expects the UAE’s departure to have a pronounced impact on prices, though not immediately. “We’re likely to see lower prices in the future” he said, once supply flows normalize. The increase in production capacity, combined with a loosening of cartel discipline, is likely to put downward pressure on the market. However, he also noted that the effects will not be uniform. While consumers may benefit, higher-cost producers could face challenges. “I don’t know whether American energy producers will feel happy about a lower oil price” he said, pointing to their relatively higher breakeven costs.
Beyond economics, Haykel underscored the geopolitical implications of the move. The decision comes against the backdrop of heightened tensions with Iran and reflects a broader recalibration of alliances. It also signals a potential shift in Gulf dynamics. While Saudi Arabia and the UAE remain aligned in the short term, particularly in the face of shared security threats, their rivalry is likely to re-emerge. The UAE’s departure, in this sense, is both a symptom and a catalyst of deeper regional competition.
Elaine Dezenski Senior Director at the FDD and head of its Center on Economic and Financial Power, highlighted the institutional consequences for OPEC itself. “There’s absolutely no question that this is really big news” she said, emphasizing the scale of the development. As “the cartel’s third-largest producer” the UAE’s exit removes both “production weight and institutional credibility” undermining the organization’s ability to function effectively.
For Dezenski, the move is less a rupture than the culmination of a longer process. “I would characterize this exit as a culmination of a long unraveling versus a sudden break,” she said, pointing to years of gradual erosion. She cited Qatar’s departure, Venezuela’s decline, and Saudi Arabia’s increasingly unilateral actions as evidence that the cartel has been losing cohesion for some time. “Even as the lead producer Saudi Arabia has acted outside of the cartel consensus” she noted.
A critical factor in this erosion is the diminishing availability of spare capacity. “This is the idle production that a cartel needs to discipline markets” Dezenski explained. “If you don’t have that spare capacity, then you lose the ability to credibly enforce the output decisions.” The UAE was one of the few members capable of playing that role, making its exit particularly consequential.
Geopolitics, once again, played a decisive role. “The UAE has absorbed thousands of Iranian missile and drone attacks in the last weeks,” Dezenski said. “The idea that they would share a cartel with a country that is attacking them is strategically untenable.” This, she suggested, may have been “the straw that broke the camel’s back.”
Economic logic reinforced that decision. With significant untapped capacity and a shifting global energy outlook, the UAE has strong incentives to maximize output. “That’s money on the table,” Dezenski said, adding that the country is unwilling to leave it unexploited. At the same time, she argued, the UAE had effectively been subsidizing other members that failed to comply with quotas. “It was absorbing the costs of others,” she said.
The broader implications extend beyond OPEC to the global economy and geopolitical balance. A weaker cartel is likely to result in lower prices over time, benefiting consumers. “The demise of the cartel would be very good for American households and businesses,” Dezenski said. At the same time, she warned that the shift could complicate Iran’s position, noting that “Tehran will need elevated oil prices to relieve domestic pressure, rearm its forces, and finance eventual reconstruction.” If OPEC can no longer sustain high prices, she suggested, those objectives will become more difficult to achieve.