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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.<\/p>\n
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.\u00a0<\/p>\n
\u201cThis is an exciting development for both the region and for the United States and our opportunity to lead and cooperate \u201d 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.<\/p>\n
Goldberg framed the move within a broader transformation already underway. \u201cWe have a long-term strategic shift that continues in the US favor\u201d 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. \u201cWe also have a short-term disruption in global supply causing a price spike that is having a domestic impact\u201d he noted, highlighting the tension between long-term gains and short-term volatility.<\/p>\n
Central to this instability is the disruption in the Strait of Hormuz, a chokepoint through which a significant portion of global energy flows. \u201cWe face still a disruption for traffic with roughly two-thirds of flow still interrupted from pre-crisis levels\u201d 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. \u201cSky\u2019s the limit in where we could go in coordination in the oil market in the long term\u201d he said.<\/p>\n
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.<\/p>\n
\u201cYou have an incredibly strong pro-American, American-aligned energy coordination bloc\u201d 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\u2019s move is not an isolated decision but part of a broader shift toward a new order.<\/p>\n
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\u2019s departure reflects deep divergences-particularly with Saudi Arabia-over both economic strategy and the future of oil itself. \u201cIt\u2019s definitely a slap in the face of Saudi Arabia,\u201d Haykel said, noting that Riyadh has historically functioned as the \u201ccentral bank of oil\u201d through its leadership of OPEC and OPEC+.<\/p>\n
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. \u201cTheir 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\u201d Haykel explained. \u201cSo therefore, let\u2019s go all out on our production and no matter what the price, let\u2019s make a buck now.\u201d<\/p>\n
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 \u201cwell under its actual capacity\u201d effectively leaving significant volumes untapped. Meanwhile, other members have failed to adhere to agreed limits. \u201cThere were notorious cheaters Iraq and others,\u201d he said, adding that these dynamics fueled frustration in Abu Dhabi.<\/p>\n
Looking ahead, Haykel expects the UAE\u2019s departure to have a pronounced impact on prices, though not immediately. \u201cWe\u2019re likely to see lower prices in the future\u201d 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. \u201cI don\u2019t know whether American energy producers will feel happy about a lower oil price\u201d he said, pointing to their relatively higher breakeven costs.<\/p>\n
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\u2019s departure, in this sense, is both a symptom and a catalyst of deeper regional competition.<\/p>\n
Elaine Dezenski Senior Director at the FDD and head of its Center on Economic and Financial Power, highlighted the institutional consequences for OPEC itself. \u201cThere\u2019s absolutely no question that this is really big news\u201d she said, emphasizing the scale of the development. As \u201cthe cartel\u2019s third-largest producer\u201d the UAE\u2019s exit removes both \u201cproduction weight and institutional credibility\u201d undermining the organization\u2019s ability to function effectively.<\/p>\n
For Dezenski, the move is less a rupture than the culmination of a longer process. \u201cI would characterize this exit as a culmination of a long unraveling versus a sudden break,\u201d she said, pointing to years of gradual erosion. She cited Qatar\u2019s departure, Venezuela\u2019s decline, and Saudi Arabia\u2019s increasingly unilateral actions as evidence that the cartel has been losing cohesion for some time. \u201cEven as the lead producer Saudi Arabia has acted outside of the cartel consensus\u201d she noted.<\/p>\n
A critical factor in this erosion is the diminishing availability of spare capacity. \u201cThis is the idle production that a cartel needs to discipline markets\u201d Dezenski explained. \u201cIf you don\u2019t have that spare capacity, then you lose the ability to credibly enforce the output decisions.\u201d The UAE was one of the few members capable of playing that role, making its exit particularly consequential.<\/p>\n
Geopolitics, once again, played a decisive role. \u201cThe UAE has absorbed thousands of Iranian missile and drone attacks in the last weeks,\u201d Dezenski said. \u201cThe idea that they would share a cartel with a country that is attacking them is strategically untenable.\u201d This, she suggested, may have been \u201cthe straw that broke the camel\u2019s back.\u201d<\/p>\n
Economic logic reinforced that decision. With significant untapped capacity and a shifting global energy outlook, the UAE has strong incentives to maximize output. \u201cThat\u2019s money on the table,\u201d 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. \u201cIt was absorbing the costs of others,\u201d she said.<\/p>\n
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. \u201cThe demise of the cartel would be very good for American households and businesses,\u201d Dezenski said. At the same time, she warned that the shift could complicate Iran\u2019s position, noting that \u201cTehran will need elevated oil prices to relieve domestic pressure, rearm its forces, and finance eventual reconstruction.\u201d If OPEC can no longer sustain high prices, she suggested, those objectives will become more difficult to achieve.<\/p>\n<\/p><\/div>\n