economy
Why Has the UAE Left OPEC?
Turn any article into a podcast. Upgrade now to start listening.
TL;DR
- The UAE's exit from OPEC is estimated to cost the country between $50 billion and $70 billion in annual forgone revenue.
- Membership in OPEC represented a net economic loss for the UAE, which is one of the more efficient oil producers.
- The 1973 OPEC oil embargo spurred investment in non-OPEC oil production, such as fracking in the North Sea and shale deposits in the US.
- OPEC's global oil production share has significantly decreased since 1973, and the UAE's exit will further reduce it.
- The UAE's decision was influenced by political factors and the economic reality that it can produce oil at a lower cost than many other OPEC members.
- The UAE's fiscal break-even price for oil is less than $50 a barrel, while Saudi Arabia needs over $90 a barrel.
- The UAE has a more diversified economy with oil accounting for only 23% of its GDP, compared to 40% for Saudi Arabia.
- The country expects to increase its oil production by over 1 million barrels per day after leaving OPEC constraints.
- Cartels struggle with internal alignment of interests and external competition incentivized by high profits.