Amidst the ongoing conflict between America and Iran, the United Arab Emirates (UAE) has decided to withdraw from OPEC and OPEC+, the organization of oil producing countries. The UAE said that considering the economic outlook and the changing energy scenario, it decided to withdraw from this alliance after 60 years. OPEC is an alliance (cartel) of major oil-producing countries that coordinates production policies to influence global oil supply and prices.

UAE out of OPEC

UAE said in a statement that it is also withdrawing from OPEC+. Russia is also included in OPEC+. This step is being considered a big blow for OPEC and its key member Saudi Arabia. This group collectively produces about 36% of the world’s oil and controls about 80% of oil reserves globally.

The UAE has long been demanding higher production quotas within OPEC, as it wanted to expand its production capacity beyond the limits set by the cartel. OPEC was founded in 1960 by Saudi Arabia, Iran, Iraq, Venezuela and Kuwait. UAE joined it after 7 years. The UAE is among the world’s top 10 largest oil producers and contributes about 3% to 4% of global oil production.

OPEC will be affected due to UAE’s exit

Experts believe that due to UAE’s exit, OPEC has lost about 15 percent of its production capacity and has also lost one of its most disciplined (rules following) members. According to the latest OPEC data, the UAE produces about 2.9 million barrels of oil every year. At the same time, the production of Saudi Arabia, the de facto leader of OPEC, is about 9 million barrels of oil.

It will be difficult for Saudi Arabia to keep the remaining OPEC members united and it will have to bear most of the burden of internal compliance and market management alone. Other members of OPEC can also follow the same path. This situation reflects a fundamental geopolitical reshaping in West Asia and global oil markets. Now this alliance includes countries like Iran, Iraq, Kuwait, Saudi Arabia, Venezuela, Algeria, Equatorial Guinea, Gabon, Libya, Nigeria, Congo.

What impact will UAE’s decision have on India?

With UAE’s exit from OPEC, questions are also being raised that what effect will it have on the world and India? First, due to the situation on Hormuz due to the Middle East war and now due to this decision of UAE, there are fluctuations in the prices of crude oil. However, it is too early to say whether this will be a relief for countries like India. If UAE increases oil production then the price of oil will reduce.

India-UAE relations have evolved into a major strategic partnership over the last few years. UAE has emerged as India’s third largest trading partner and a major source of Foreign Direct Investment (FDI).

Also read: Good news for India from Libya! Gas and oil reserves found, how much stake does Oil India have?

After the attack on Iran by America and Israel, a sharp increase in the prices of crude oil has been seen. As the threat of war and supply disruption increases, the oil market begins to fluctuate. Oil and gas companies get direct benefit from this. But the question is, will this advantage last for a long time and will companies invest heavily in new projects?

When tension increases in any large area of ​​the world and there is a fear of stopping the oil supply, prices increase rapidly. This also happened during the Russia-Ukraine war. In the third quarter of 2022, ExxonMobil and Chevron together made a profit of more than $30 billion, because at that time the prices of oil and gas were high.

Rise in crude oil prices

In the recent situation, Brent crude oil went above $ 85 per barrel for some time. Natural gas prices in Europe also reached the highest level since 2023. The main reason for this is the almost closure of the Strait of Hormuz. About 20 percent of the world’s crude oil supply passes through this route. The pressure in the gas market has also increased due to Qatar stopping LNG production.

Experts say that if prices remain high for a long time, only then will companies decide to dig new oil wells or start big projects. Big projects involve huge investments and may take months or years to start. According to Dan Pickering, if Hormuz remains closed for a long time, the price of oil may go up to $ 100 per barrel, but this is not yet decided.

US Navy will protect oil tankers: Trump

US President Donald Trump has said that if needed, the US Navy will protect oil tankers and insurance assistance will also be provided to shipping. After this statement, the prices softened a bit. If America, China or other countries release their emergency oil reserves in the market, the prices may come down further. At present the market is considering this as a short term problem.

The US oil and gas industry will certainly benefit from higher prices, but they cannot immediately make up for the Middle East’s supply shortage. America’s Gulf Coast refiners are earning better profits than before as demand for petrol and diesel has increased. LNG exporters have also benefited.

Supreme Court’s strict comment on free schemes – ‘How will development happen if we focus only on free food, bicycles, cash transfers?’