(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).
Lots of things have existed throughout history, yet we have overcome them in the last few hundred years. There is peace in Europe (west of Russia) which had as ancient conflict as Yemen; there is democracy, freedom, women have equal rights in much of the world, starvation and many diseases are mostly overcome, warfare is very rare and not an omnipresent threat, ...
Thank goodness our predecessors didn't think this way. They thought that through reason, hard word, and humanism they could overcome these things, and they did. No doubt there were plenty of naysayers.
Defense of Israel was the primary justification offered in a recent State department memo asserting the legal basis for the war with Iran. Unusually, its publication was not announced on social media or to the press, unlike most state department official pronouncements. Anyway, rather than being opinion, this is (for the present) the official position of the United States government.
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...
UAE is in a tough spot because while they have diversified from oil, the industries they have diversified into like tourism, air travel and banking, were relying on a halo of safety that turns out to not exist.
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.
If they join a religion that isn't on the state approved list, they can't get married there and hard or extra expensive to get buried. There are some limits on religious freedom.
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.
The Israeli openly proposed for the Gaza Palestinians to move to Egypt (effectively ethnic cleansing Gaza, their obvious goal), not that long after 7.10.
Egypt said 'HELL NO', first, because they don't want to deal with Palestinians (both political and economic nightmare), and second because it would have been viewed as ceding to Israelis and helping them cleanse Gaza, which would be highly unpopular among their population.
As an Arab friend summed it up, 'All Arab governments like to trumpet the Palestinian cause when it serves them, but none of them are willing to lift a finger to help the Palestinians.'
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.
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).
> one-party state of Singapore (technically democratic, in practice it functions like a recallable monarchy).
This is untrue. It would be more accurate to say that the same party has been in power since independence from the UK. Each election in the last 30 years has slowly moved the needle -- fewer and fewer of seats held by the majority party (PAP). I guess there will be a non-PAP prime minister in the next 20 years. Sure, it doesn't look like other democracies, but please don't call it one-party. Also: See Japan. Many outsiders just don't understand democracy in Japan and try to impose their worldview on a different type of democratic system.
I'll yield that it isn't a pure one party state. There is some room for difference of opinion whether you want to characterize it as one or not.
But let's not play the bullshit and borderline xenophobic, ad-hominem attack that it's just "outsiders" who "just don't understand." Or try and distinguish that it's people 'imposing their worldview' (something every human does no matter what they are arguing).
But don't take my word for it. Read what Lee Kuan Yew had to say himself[0]:
The PAP represents the broad middle ground in society and attracts the best and brightest people into Government, LKY said last night. He therefore did not see a two- or multi-party system emerging in Singapore soon.
Ah yes, good ol LKY, the outsider who just doesn't understand Singapore, and with such a non-Singaporean 'viewpoint' that he had quite popular support (even if you want to argue it is a minority, it was widespread enough as to be valid enough to be considered one valid and widespread Singaporean point of view). Calling it not a two or multi-party system, leaving quite obviously his assertion is that it's a one-party system.
This and other points, documented by Yeo Lay Hwee (Senior Fellow, Singapore Institute of International Affairs) , who even if she flip flops between suggesting Singapore is a one-party state, lists quite a few reasons why it is a reasoned viewpoint from an understood observer [1].
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.
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.
> UAE's major issue with Saudis is their quiet support for Islamism as well.
What is the meaning of "Islamism" here? GCC is something like 98-99% Muslim by native population. Also, Saudi Arabia is the home of the two most important masjids in the Islamic world.
MBZ is definitely more anti-islamism than the saudis. UAE really doesn't like muslim brotherhood while Saudis have supported groups aligned with them in Yemen plus Saudis are getting closer to Turkey/Qatar.
Even UAE/saudi backing different groups in Sudan war is rooted in Yemen/brotherhood issue. Both Sudanese groups sent competing troops to fight in Yemen.
> While Saudi Arabia does not have any problems with Islamists and in fact more or less openly supports them, according to Donelli, the UAE sees radical religious groups as a threat to its domestic stability, as well as stability in the wider region. This distinction is also evident in the two countries’ support for the respective sides in Sudan. The UAE supports RSF’s more secular version of Islam, whereas the SAF under al-Burhan’s leadership is widely seen as more or less a continuation of the regime of Omar al-Bashir, which was heavily influenced by the Muslim Brotherhood. https://nai.uu.se/stories-and-events/news/2025-02-07-gulf-st...
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.
> Legal experts, analysts and local officials warn that the ultimate objective is the “emptying of residential geography”, carving out a depopulated “buffer zone” at the forward edge of the border that permanently prevents displaced residents from returning and establishes a violently enforced demographic reality on the ground.
That's called "ethnic cleansing" when carried out by other countries. Iran will not agree to peace while this is going on. Partly because that's Iranian proxy forces in there among all the civilians getting killed.
I think you underestimate the impact of a blockade on Iran's ports... Iran (and China) can maintain this posture for ballpark a month or so more before economic mayhem leads to another popular uprising. Time is in the US's hands up until the midterms and even then until January
I think you underestimate how little economic pressure matters when people are up against an invader who attacked amidst negotiations for bogus reasons, threatened total annihilation, and killed thousands, including a school full of children.
This is a population that absolutely despises their government. At least a very large percentage are in that category. I think you misunderstand the reality on the ground
Iranians despise their government in about the same way that Americans despise their government - which is to say, both peoples got the government they deserve...
If the Chinese take on the burden of maintaining the free flow of shipping through the Gulf by stepping up as one of the key beneficiaries of said shipping that would simply be an appropriate burden sharing mechanism in my view.
hmm .. imho .. the supply chain between Iran, Russia, and China is .. radically .. under-estimated in the equation by those states who have lost control over the worlds energy supplies.
It is more like the Western nations which cannot withstand another month of all this 'posturing' .. But there is some resilience to the idea that the Iran/Russia/China corridor is going to keep those nations relatively buffered from total disaster.
This is the US trying to salvage the petrodollar. They want those t-bills and oil priced in dollars to maintain reserve currency status, but the whole world is divesting anyway. UAE is hoping that by leaving OPEC they can continue to do business and get protection from US. But US isn't gonna risk a larger war just to defend UAE, US has plenty of oil to exploit in Venezuela and at home. So UAE is just kinda screwed, and petrodollar will become north-american-petrodollar. My guess is it'll happen by Q1 2027
I’ve developed a simple heuristic: If someone unironically invokes petrodollar as an explanation for anything in 2026, they’re probably not worth taking seriously.
The petrodollar and petroeuro is misunderstood. The real point: These oil/gas exporting nations don't have enough investable assets in their own nations. As a result, they need to invest overseas. For a long time, the best places to invest this excess capital in the world were/are North America, Europe, and Northeast Asia (Japan/Korea/Taiwan). If you want to say that petrodollar or petroeuro is doomed, what will replace it?
It does seem like the petrodollar is coming to an end. Even if we wanted to keep killing/abducting the leader of every tiny oil nation shortly after the decide to sell oil in another currency (like we did to Iraq, Libya, and Venezuela), bigger ones we can’t just do that to practically are going to start.
The writing is on the wall. It might take decades, but it’ll end.
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.
OPEC member countries control approximately 50% of the world’s crude oil exports. Additionally, OPEC nations hold nearly 80% of the world's proven oil reserves.
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.
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.
> First of all, if the goal is to prevent instability OPEC is doing a terrible job.
I mentioned this upthread, the instability OPEC is trying to prevent is civil unrest from not being able to fund their social programs and governments. They need a price that puts them in the black and the rest of the world will pay. If it was a free market the fracking boom would still be raging and oil would be $30/bbl. Many gulf nations would fall apart if oil was at that price for a long period of time hence the price manipulation. (I'm not sure how they got the frackers to ease up, some say many of the frackers were bought out by OPEC members and their wells capped but that's just conspiracy afaik)
> 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.
The prices would go down too much, and then infrastructure would rot as production slows down. Then, prices would skyrocket, and so on.
Oil production and distribution is basically infrastructure, like energy or internet. It can't really follow free market dynamics without eating itself.
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.
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.
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.
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?
I believe that this administration more than any other post-WW2 administration either has a complete disregard for alliances or is actively seeking to shatter them even though most of them were designed by the US for US interests (eg NATO).
So yes, I can see this admin seeing OPEC as a cartel that is against US interests even though OPEC actually stabilizes global oil prices, actively. I also believe it's highly likely that the US wants to crash the global oil market when the Strait eventually reopens ahead of the midterms.
I too have seen the reports of a potential US UAE bailout and that could be leverage here. It's too early to say. It'll take time to realize the consequences of this deal and understand what led up to it and what the real goals are.
The whole war goes beyond miscalculation. It's the worst strategic blunder in US history (IMHO) and it's not even close. In 1973, the worst impacts happened 6 months after the blockade started. Well, guess what's in 6 months? The midterms. Iran is acutely aware of the US domestic politics of this. Iran also knows this is their best possible chance to end economic sanctions. Iran is more prepared to wait this out. Their goal really is to make the cost of this war so high that the US will never again think about repeating it.
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.
(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...
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...
https://www.youtube.com/watch?v=qsO-rULEfrk
Kind of depressing thought actually.
I gotchu: https://youtu.be/-evIyrrjTTY ("This Land is Mine", 3 min)
Thank goodness our predecessors didn't think this way. They thought that through reason, hard word, and humanism they could overcome these things, and they did. No doubt there were plenty of naysayers.
What will we do with our turn?
I guess Al-Qaeda and Isis are also there.
"I and my brother against my cousin, and I and my cousin against the stranger."
https://www.state.gov/releases/office-of-the-legal-adviser/2...
"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...
[Ω] https://en.wikipedia.org/wiki/Pakistan_and_weapons_of_mass_d...
So there's that.
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.
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?
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.
Don't Egypt and Israel hate each other though? Could UAE feasibly align with both?
So yes, the UAE could align with both.
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.
Egypt said 'HELL NO', first, because they don't want to deal with Palestinians (both political and economic nightmare), and second because it would have been viewed as ceding to Israelis and helping them cleanse Gaza, which would be highly unpopular among their population.
Yeah, that's not "wide open". Israel would absolutely be happy with a one-way exit gate.
Bottom line, Egyptians are not interested in supporting millions of refugees inside their border. So the border stays closed to mass immigration.
Also true: If Egypt opened the border and Israel objected, Israel would take swift military action.
But NONE of the Arab countries want to help Gaza people really.
This is directly contradicted by Israel's actions in the Gaza War. Egyptian control of the crossing was not enough, so they took it. https://www.bloomberg.com/news/articles/2024-05-07/israel-ra...
thats not something israel would be excited about
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).
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.
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...
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...
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
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.
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.
Mbpd = thousand barrels per day, MMbpd = million barrels per day
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_...
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).
But let's not play the bullshit and borderline xenophobic, ad-hominem attack that it's just "outsiders" who "just don't understand." Or try and distinguish that it's people 'imposing their worldview' (something every human does no matter what they are arguing).
But don't take my word for it. Read what Lee Kuan Yew had to say himself[0]:
Ah yes, good ol LKY, the outsider who just doesn't understand Singapore, and with such a non-Singaporean 'viewpoint' that he had quite popular support (even if you want to argue it is a minority, it was widespread enough as to be valid enough to be considered one valid and widespread Singaporean point of view). Calling it not a two or multi-party system, leaving quite obviously his assertion is that it's a one-party system.This and other points, documented by Yeo Lay Hwee (Senior Fellow, Singapore Institute of International Affairs) , who even if she flip flops between suggesting Singapore is a one-party state, lists quite a few reasons why it is a reasoned viewpoint from an understood observer [1].
[0] https://eresources.nlb.gov.sg/newspapers/digitised/article/s...
[1] https://library.fes.de/pdf-files/iez/01361007.pdf
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.
This is a battle of economies and regional influence.
Even UAE/saudi backing different groups in Sudan war is rooted in Yemen/brotherhood issue. Both Sudanese groups sent competing troops to fight in Yemen.
> While Saudi Arabia does not have any problems with Islamists and in fact more or less openly supports them, according to Donelli, the UAE sees radical religious groups as a threat to its domestic stability, as well as stability in the wider region. This distinction is also evident in the two countries’ support for the respective sides in Sudan. The UAE supports RSF’s more secular version of Islam, whereas the SAF under al-Burhan’s leadership is widely seen as more or less a continuation of the regime of Omar al-Bashir, which was heavily influenced by the Muslim Brotherhood. https://nai.uu.se/stories-and-events/news/2025-02-07-gulf-st...
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.
> Legal experts, analysts and local officials warn that the ultimate objective is the “emptying of residential geography”, carving out a depopulated “buffer zone” at the forward edge of the border that permanently prevents displaced residents from returning and establishes a violently enforced demographic reality on the ground.
That's called "ethnic cleansing" when carried out by other countries. Iran will not agree to peace while this is going on. Partly because that's Iranian proxy forces in there among all the civilians getting killed.
If China were to involve its Navy in opening the straight that's exactly what Good outcome could look like
Out of curiousity, what's your good outcome from the Chinese sending destroyers to the gulf?
It is more like the Western nations which cannot withstand another month of all this 'posturing' .. But there is some resilience to the idea that the Iran/Russia/China corridor is going to keep those nations relatively buffered from total disaster.
The writing is on the wall. It might take decades, but it’ll end.
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.
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...
While I like the parent's provided information, I feel like the pandemic, fiscal stimulus, and wars were bigger drivers for inflation!
[0] https://www.reuters.com/article/business/healthcare-pharmace...
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.
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
> 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
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?
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.
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.
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.
https://www.cbc.ca/news/world/potato-cartel-fries-tater-tots...
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...
"In 1949, Venezuela initiated the move towards the establishment of what would become OPEC, by inviting Iran, Iraq, Kuwait and Saudi Arabia" ...
Nigeria joined OPEC in 1971.
OPEC or UAE?
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.
Slowly weakening remaining Arab states and setting them up to fight each other.
Why/how?
Without a healthy cartel, wouldn't prices go down? Cheaper oil means less adoption of alternate energy sources.
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.
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.
> 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.
I mentioned this upthread, the instability OPEC is trying to prevent is civil unrest from not being able to fund their social programs and governments. They need a price that puts them in the black and the rest of the world will pay. If it was a free market the fracking boom would still be raging and oil would be $30/bbl. Many gulf nations would fall apart if oil was at that price for a long period of time hence the price manipulation. (I'm not sure how they got the frackers to ease up, some say many of the frackers were bought out by OPEC members and their wells capped but that's just conspiracy afaik)
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.
Oil production and distribution is basically infrastructure, like energy or internet. It can't really follow free market dynamics without eating itself.
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.
They can, though? Batteries can offset the start-up times, otherwise gas plants can start up within minutes and nuclear can ramp up within days
Turbines could work. But that's not the majority of plants.
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...
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.
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.
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.
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.
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
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
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?
So yes, I can see this admin seeing OPEC as a cartel that is against US interests even though OPEC actually stabilizes global oil prices, actively. I also believe it's highly likely that the US wants to crash the global oil market when the Strait eventually reopens ahead of the midterms.
I too have seen the reports of a potential US UAE bailout and that could be leverage here. It's too early to say. It'll take time to realize the consequences of this deal and understand what led up to it and what the real goals are.
The whole war goes beyond miscalculation. It's the worst strategic blunder in US history (IMHO) and it's not even close. In 1973, the worst impacts happened 6 months after the blockade started. Well, guess what's in 6 months? The midterms. Iran is acutely aware of the US domestic politics of this. Iran also knows this is their best possible chance to end economic sanctions. Iran is more prepared to wait this out. Their goal really is to make the cost of this war so high that the US will never again think about repeating it.
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.