(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?
Saudi Arabia has the East-West Pipeline [1] that takes ~7Mbpd (million barrels per day) of oil to Red Sea ports to avoid the Strait of Hormuz. They were already using it so there's not a lot of extra capacity they can get out. If we continue up the escalation ladder, the next big risk is that the Houthis close Bab al-Mandab, which is a not-quite-as-narrow but still vulnerable chokepoint to the Red Sea.
The UAE has the ADCOP (Abu Dhabi Cross Oil Pipeline) [2], which takes ~1.8Mbpd to the Gulf of Oman. This is beyond the Strait of Hormuz but not that far so technically is still vulnerable to drone attacks (in particular) from Iran if, again, we climb the escalation ladder.
The real issue is American security guarantees to GCC nations have been shown to be an illusion. Heck, the US can't protect their own bases in the region. Also, the US can't protect maritime traffic through the Strait. I mean this is in all seriousness: there is no military solution to this problem short of the use of nuclear weapons.
That means we are now in a situation where the US has to either split with Israel and offer Iran significantly better terms than they had before the war, likely including the lfiting of economic sanctions, or the US has to sit and watch the world plunge into recession and Asian countries in particular are going to burn. And who knows what a prolonged impasse will do to Europe, particularly come winter.
So far, the US seems to prefer letting the world burn rather thans plitting with Israel.
A protection racket ceases to be a protection racket if it no longer offers protection.
UAE is the third largest producer in OPEC, and has options to avoid the straight, yet Their economy recently get shocked though by the war they wanted to avoid
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).
Saudi Arabia and Somalia agreed upon military cooperation early this is year. Egypt and Turkey are in this axis as well.
Somaliland was recognized by Israel late last year. UAE and Ethiopia are on this axis.
Part of the endgame might be lifting the Middle East from a transit zone to a logistics hub.
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.
I think it's not so much that they don't have liquid assets they can sell.
The issue is those liquid assets are US Treasuries and US public market equities (mag7 etc.).
They don't really want to sell them, and they also know that the US really doesn't want them to sell them - the last thing Trump wants heading into the midterms is an S&P500 bear market and 10y treasuries heading back to 5+%.
So they ask for a swap line and they're negotiating from a position of strength, the US doesn't have much of a choice but to give them as much as they need and damn the consequences
> 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 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
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.
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.
OPEC has long been Saudi Arabia reducing output, and everyone else selling everything they can. They haven't had much power since the 1970s, but that they exist means they are a threat that if everyone else actually stuck to the agreement for a change.
This is the common problem for cartels: everyone has inventive to cheat on the deals made. By selling a little more than your share you get more money, while because everyone else is following along the prices are higher. (see also prisoners dilemma)
Repeated PD is very different. The whole point of a cartel is that everyone inside is incentivized not to cheat, and it works as long as they agree on what's fair. The problem for cartels is people not in the cartel.
Tangent but: this is also why reducing greenhouse gas emissions is hard.
As long as fossil fuels remain one of the cheapest easiest to scale ways to make power, there’s a similar incentive to cheat. If everyone else cuts emissions and you don’t, your margins are higher and you can undercut them. Global reductions require an all-cooperate scenario.
Developing nations have the strongest incentive to cheat since they need those margins to catch up.
Which is why I think little progress will be made until other sources are actually cheaper. Until then it’s beyond us politically. We can’t get all nations across the world to simultaneously cooperate at that scale.
> As long as fossil fuels remain one of the cheapest easiest to scale ways to make power, there’s a similar incentive to cheat. If everyone else cuts emissions and you don’t, your margins are higher and you can undercut them. Global reductions require an all-cooperate scenario.
IMO economics always wins. You're never going to see an all-cooperate scenario.
You will see an all-compete scenario, so constantly reducing costs for alternatives is key but you also have to find a way to ensure that the producers can win economically too. This is the conundrum.
If solar panels get cheap enough to create high demand, then that demand has to carry through the process of manufacturing, installing and maintenance. Every time I read that solar has gotten even cheaper, I start calling for quotes to install them at my house and the prices are borderline obscene. Same for geothermal last time I needed to update my HVAC.
I want solar and geothermal to work but the economics are a challenge.
Agreed - the good news is, in many circumstances renewable energy is cheaper for new energy capacity. As long as regulations move in the right direction, we are likely to see the global energy mix move towards renewable sources over time
So little political will is needed at this point as the economics now favor renewables. Unfortunately most of the political will seems to be leaning towards protecting the more expensive fossil fuel sources of energy.
Renewables (particularly solar) already are cheaper [1].
It's political will not economics that keeps us addicted to fossil fuels. Nobody gets rich from solar panels. You build them. They produce power. Oil wells like any mine are huge wealth concentrators. That's the real problem.
If anything, a bunch of countries (particularly those who are net oil importers) are re-evaluting their energy dependence given that the compact that the US will guarantee maritime transport has essentially been broken.
I don't know where this idea that OPEC is toothless came from but it's objectively incorrect. Counter example: OPEC was the single largest factor in the inflation shock of 2020-2022. And nobody talks about it.
In March 2020 at the start of the pandemic, it looked like the world economy would come to a standstill. Oil futures went into extreme contango, briefly going negative as nobody was taking delivery. So in April 2020 the Trump administration went and browbeat all the OPEC+ members to massively slash production [1][2][3]. Art of the deal. This culminated in a 2 year deal to cut production by initially 9.7Mbpd (million barrels per day) and then reducing over the 2 year period [4]. This was a disaster.
For context, OPEC does this sort of thing by themselves without any kind of prompting when necessary. They meet every 3 months and project demand and then set production targets to maintain a floor and ceiling for oil prices. Individual members can and do cheat, producing more than their allocation and lying about production cuts but all in all the system mostly works.
Trump loses the election. Biden comes in and demand rockets back in 2021 and crude oil prices skyrocket, as do gas prices as a result. The Biden admin quietly went to MBS to ask him to end the deal. He refused. You can overlay this 2 year deal with global inflation and it pretty much matches up exactly.
So Republicans blamed inflation on Biden even though it was a Trump deal. The Democrats didn't abandon US foreign policy and publicly hang out an ally to dry so instead just blamed greedy oil companies for price gouging. And nobody at all mentioned the 2020 OPEC deal. Not in mainstream politics anyway.
That was a 10% cut in global supply and look what it did to inflation. Closing the Strait cuts global supply by 20%. In 1973 with the Arab oil embargo, the major recessionary effects took 6 months to really hit. This is a ticking time bomb that will likely explode leading into the midterms.
This is interesting and under-reported. But it doesn't mean that oil would've spiked a lot less without the OPEC cuts, and that's not the same as gasoline costs which depend on refineries too.
Isn't the solution in game theory when there are multiple turns to just repeat the move the previous person made.
So if the other side overpumped by x1 amount then you pump an extra x1 the next turn / year (maybe multiplied some reference production factor as they don't all have the same absolute limits).
Simple game theory doesn't work in the real world. In the short term most OPEC+ members other than Saudi Arabia have very limited technical ability to significantly increase or decrease production. It's not like they have a big valve that they can open or close at will. For many oil wells, restricting flow would actually damage the geologic substrate. And drilling new wells (including all of the supporting infrastructure) can take years.
Tit for tat (start by cooperating, and for each subsequent choice do what your opponent did last turn) is the optimal for repeated 2-party prisoners' dilemma.
The real world is much more complex. OPEC is a multi-party game, for starters. For another thing, there are cascades of social/political problems that get in the way of optimal strategy at the level of nations. I.e. that only works if politicians are more interested in solving problems than controlling narratives or maintaining power. Unfortunately, an ineffective leader can be sustained by controlling the narrative, while an effective leader can be destroyed by lack of control over the narrative. And one of the best ways to control a narrative (especially if you aren't a very good leader to begin with) is to create so much chaos that it distracts from your shortcomings, and blame the chaos on enemies.
"My grandfather rode a camel, my father rode a camel, I drive a Mercedes, my son drives a Land Rover, and my grandson is going to ride a camel". Sheikh Rashid bin Saeed Al Maktoum, the former Emir of Dubai.
Well yes, that is because they have heard the line and took it as a warning.
However just because they are trying doesn't mean they will succeed. Their attempts at diversification still seem very reliant on oil money, and its far from clear that they will eventually be able to stand on their own.
Their whole investment castle is built on sand (pun intended) and when oil even remotely starts to fade out as a commodity, it will crumble instantly. Panic will ensue and corruption will be rampant in order to continue the lavish consumerism. Everything will be sold for pennies. The difficult thing is not to make money once, it's to keep them afterwards.
Money retrained means nothing when cheap oil is gone. Cars are only a thing because we have volumes and energy for large supply chains and scale. A rich person can afford a model-T level car, but large parts of what makes a luxury car are things that they won't be able to get at any price without modern industry that is built on distributed wealth for many people. All the electronics - needs industry. Precision manufacturing - depends on precision electronics. You can't even rebuild a current design if someone thinks to print out the blueprints.
Of course who knows how to end of oil will happen. Best case is a switch to renewables (or fission...) in which case there will be more than enough expensive oil for a few rich people to drive expensive gas cars if they want to. There are lots of other options as well, only time will tell.
(and a nod here to the replies who suggest this was never actually said)
Retaining wealth is the easy part, retaining political power is hard. They don't want to be regular jetsetting billionaires, they want to rule their own domain. And in order to do that, they need to figure out how to make people want to keep living there.
Money solves a lot, but not everything. At the end of the day it's still a country in a desert. Unfortunately that entire region is a repeating history of temporary wealth and stability that gives way to instability. When that happens the underlying constraints can quickly reassert themselves. Just luck at the history of Kuwait.
The point of the line is not that they aren't going to try, it's an acknowledgement of the extreme challenge in diversifying in the short term and incentivizing the next generations who are very, very comfortable with the status quo to build other income streams in the long term.
Where is the Land Rover supposed to sit on this scale?
There are current Land Rovers with market positioning suggesting they're "better" than Mercedes, and there are historic Land Rovers which were arguably not much better than camels.
That's a quote. You may want to ask Sheikh Mohammed (current ruler of Dubai) for why his dad was mocking him for his choice of a car. I just posted the quote - felt relevant.
The US has long sought to erode OPEC’s ability to dictate global oil prices. The US has made massive progress in being broadly energy independent to isolate it from challenges elsewhere. The US has been a net energy exporter since 2019. Global oil pricing was always an annoying thorn in that strategy.
This is an initial but big crack in shaking up global oil markets in a way that meaningfully shifts global power dynamics.
They export because their own refineries along the Gulf coast esp were designed for middle east heavy crude cuz the US once upon a time believed it was about to run out of American light sweet crude. So the story is not black and white.
Stop repeating this lame talking point like a robot. We export because the crude oil export ban was lifted in 2015. If we didn't then we would already have the refinement capacity now.
There are financializing vampires in charge and their only goal is to short term bleed the country dry. "Investors" are allergic to investing.
CAFE standards were always a stupid idea. If we want to reduce fuel usage then increase the tax on fuel instead of punishing manufacturers for selling vehicles that consumers want to buy.
Always gonna happen. Oil margins are gigantic and they'll use every dime of runway they can. Electric is better in every single way and batteries tech is only making that more true every day. The dinosaurs won't go quietly into the night.
I think the initial crack was ousting Maduro in Venezuela. Since OPEC exempts Venezuela from production caps, it gives the US government a lever on non US production.
Venezuela produces heavy "sour" crude (this means high in sulfur). Many of the US refineries capable of handling sour crude have closed, partly because the sulfur content makes the refineries stink (and emit lots of pollution) and partly because they need more expensive piping to handle the corrosive materials (not just the crude, but HF acid that's used in the refining process).
The last refinery to be built in the US opened in the 1970s. Since then, refineries have closed. None of the owners of refineries will sell them because of SuperFund legislation. It is the same reason that when a gas station is sold, the fuel tanks are dug up and replaced. This way, there's no way to claim that the previous owner left hazardous material to be cleaned up. SuperFund laws say that every previous owner is liable for the cost of cleanup. It doesn't matter how long ago the property was sold.
This is horrible from POV of mitigating the climate catastrophe and the global death toll. We (as in humanity) are really late in ramping down fossils production and use.
Eh if the U.S. gets into a forever war with Iran the same way we did with Iraq and Afghanistan and Vietnam (or like how Russia got into one with Afghanistan and Ukraine), the climate crisis is solved. Five years of the Straight of Hormuz being closed and everybody will be using EVs.
Legislation isn't going to work. Economics isn't going to work. War - which cuts off the flow of petroleum because nobody is willing to risk their life for oil - will work very quickly. Nothing quite like a shortage to spur innovation.
The US isn't insulated from global oil supply shocks because crude oil and refined petroleum products are traded on global markets and natural gas is somewhat traded on global markets (there are limits to LNG exports).
So yes the US could limit or ban exports. Many countries (including China) have done this in a kind of energy nationalism, but that hangs out allies to dry in a way that would make the US deeply uncomfortable. It would threaten European energy security. It would come at the cost of Latin American exports. So there's a cost to pay.
And more to the point, no US government regardless of party is going to hurt corporate profits by limiting exports. Biden could've done it in 2021-2022 and didn't. And Trump certainly won't. As one example, a big release from the SPR was on an oil-for-oil basis. Rather than cash ii on high prices, it's just a massive gift to oil companies who have to repay the oil (and then some) at some unspecified future point when oil will be cheaper. That's billions the US could've added to government coffers.
I do agree there is a power shift going on but not because of US energy independence. No, it's because the US cannot militarily protect GCC countries and cannot force open the Strait of Hormuz or guarantee global shipping, which has essentially been a US guarantee since 1945.
I do think this administration does want to crack OPEC but that's likely to be of massive benefit to China without China having to do anything.
Global pricing affects all fossil fuels and always will. Energy independence will remain a fantasy until we are fully on renewables. Which is entirely within reach and requires fighting zero wars.
...and up to that point, first world countries should not be complaining about developing nations using coal. It's a lot more shock resistant than diesel and natural gas, which is especially important for those that are so much more sensitive to inflation. From what I've seen coal, solar (hydro too, but that's land-dependent) and micromobility are save harbors. Not much they can do about the fertilizer shortfalls though.
Geopolic: A US-aligned Gulf state walking away from a Saudi/Russia-led bloc in the middle of a war, after deciding the bloc didn’t really have its back
Economic: it weakens OPEC’s pricing power in a way you might not see right away if Hormuz is closed, but it could really change the supply picture once things reopen
UAE announced this week they might start selling oil in yuan so this doesn’t read like anything US aligned to me. If anything it reads like the opposite to me - a move away from traditional opec petrodollar system
exactly. this sounds like a third path where the UAE charts its own course, and that course increasingly looks paved in Yuan.
OPEC cartel membership didnt gain it access to Hormuz, and the US petrodollar promise to protect UAE states from aggression in exchange for trade in USD could not be upheld.
Im not concerned with them selling with the yuan as China regularly screws around with its currency. The bigger issue is and other currencies which reduces the US impact.
On the backside I’m sure there will be lots of fun back door deals around all those interceptors and future anti drone technologies. Today though the US has been the impetus of a lot of the current issues.
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
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.
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
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.
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.
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.
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.
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.
I am personally convinced that there are many more people pretending to understand geopolitics than people who actually understand. It could be that no one truly understands due to the amount of fractal complexity and emergence.
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's not that the petrodollar is doomed, it's just 'devaluing'. The US isn't a stable, safe place for cash anymore. But the world still needs massive amounts of safe cash. So there really is only one alternative: diversify.
They'll diversity into Gold, rare-earth metals (they're only getting more important), CIPS, Yuan, Euro. That diversification helps everyone else, but will hurt the US, which hurts financial markets, and thus everyone else. And once they're all divested, the diversification will add risk and losses. Can't be helped though, they still need security. So we're looking at a generation of slow global decline, probably propped up slightly by the industrialization of AI (which of course China is leading the world in, as nobody cares about "better", they care about "cheaper"). China is the real winner, because all they need is oil, and their partners will make sure they get a steady supply (because it's in their partners' interests; that's what having allies is all about).
US can't stop this; their military isn't equipped to fight wars on multiple fronts, their lumbering, expensive weapons can't be sustained in a protracted conflict, their wars aren't popular at home, and they don't have the manpower. Even when they eventually start the draft back up it'll take years to build up their warfighting capabilities, and by then the world will have diversified enough that they can take the hit. (The US will try a World War anyway to try and retain the Empire, because their leaders are psychotic morons and their people are compliant, but they'll still lose. (Historic parallel: Sparta. Great military, but tiny, so most of their power came from wealth and tenant states; eventually the rest of the mediterranean got tired of their shit (installing dictatorships, alienating allies) and their empire died. Hell, even their Navy was paid for by Persia - foreign investment used to weaken rivals via proxy war))
I don't think this is avoidable. Nobody trusts the US now. The divestment has already begun. Countries aren't suddenly going to change their minds - even if Trump doesn't overthrow the government to cement this new status quo in 2028 (which he 100% will), the next President could be another Trump. Nobody wants to be subject to their insane policies (foreign & fiscal) anymore. So the US isn't a secure place for cash. Nations aren't just going to shrug and ignore it, they're going to act to protect their interests.
Wow, this is a great share. I am regular reader of FTAV. I highly recommend it to others here.
I like this part:
> One big flaw in their argument is that the petrodollar isn’t nearly as big a factor in the global dollar ecosystem as it used to be
And:
> A proper grasp of the events in question suggests that the ballyhoo over the petrodollar’s alleged imperilment will prove to be just the latest in a series of false alarms about the dollar’s status atop the world’s currency hierarchy.
A lot of online armchair analysts miss the fact that the Euro is just as important as the US Dollar in global trade. The Eurozone has a combined GDP of about two thirds of the US. That is huge! And they Eurozone does lots of trade with countries outside the Eurozone, so the Euro is a vital part of the global economy. The number one forex pair globally is EUR/USD. It is trivial to convert between the two (tight spreads, giant order capacity), so buyers and sellers are fine with either.
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.
Petrodollar discourse tends to annoy me because people tend to get cause and effect confused.
The dollar isn't strong because oil is traded in it. Oil is traded in dollars because the dollar is strong. What makes the dollar strong? The US military and, at least up until now, the US essentially guaranteeing global maritime trade. Oh and the US also being the world's arms dealer. Why this is such a huge strategic blunder is because the US has proven itself unable to militarily open the Strait of Hormuz. This should surprise precisely no one. The Joint Chiefs knew it. The Intelligence community knew it.
Let me put this another way: you could make all oil trades in euros tomorrow and pretty much everyone would still hold dollars and convert to euros as needed. People don't understand this so you get silly conspiracy theories around, say, the Iraq War being started because Saddam Hussein was starting to trade oil in euros.
Let me give you a concrete example of this all in action. Iran has threatened to charge tolls to pass through the Strait and they wanted to be paid in crypto, largely to avoid having their funds frozen (as has already happened) because the US has that kind of control over the financial system. But that's still a problem because all US companies and any financial institution that wants to main access to the global financial system isn't legally allowed to trade with Iran, even in crypto. My point is that all of this could be traded in crypto and it wouldn't matter. The "petrodollar" would still rule.
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.
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 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.
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.
Can somebody knowledgeable help me understand why this is in the interests of the UAE? Also, seems like a moot point since the strait is closed. Why do they think it’s in their best interests, and why now?
Probably Saudi Arabia is more important in OPEC, so that might be actually a middle finger to SA. Saudi Arabia and UAE had a recent dispute in Yemen that went pretty hot.
An alternative is the US trying to dismantle OPEC together with its new found supply in Venezuela to drive prices down
It was initially more union-esque to prevent being played off against each other and a dash of ideology. Then it became a cartel with the goal to to increase income / stabilize the market as well as a general international-economic-political forum because so much of their economies depend on oil.
Production limits were always a bit shady. Most meetings were just nations declaring what they'd (be able to) do and then a lot of talking to maybe see if things could be tweaked a bit and come up with a statement that made it look useful.
Their last 'success' was before Russia-Ukraine where they basically tried to suppress the price to make US shale too expensive and reduce its market share. Which happened. But again, debatable to what extend by OPEC's influence while they do write their own press release - with the explicit goal that the perception of power increases the price more.
Currently the entire region is going up in flames and allegiances are being stressed to breaking point.
The UAE leaving - as far as i can tell - is just a middle finger telling some of the club members its a farce and useless when it comes to its goals and (soft) powers, in the new reality of war & US export dominance. The middle finger being a political signal as everyone seems to be in disagreement on how best to handle the Israel-US-Iran war.
1) The UAE has its "Abu Dhabi Crude Oil Pipeline" (see https://en.wikipedia.org/wiki/Habshan%E2%80%93Fujairah_oil_p...) to Fujairah export terminal on the "Gulf of Oman" bypassing the choke-point of "Strait of Hormuz" entirely. Given the current blockade of the strait and its uncertain future, Fujairah is now central to crude oil shipments for the World Market.
2) Thus far, the UAE has been prevented from maximizing its revenues due to OPEC/OPEC+ production caps which is no longer acceptable due to global needs. It can now chart its own independent course by ramping up production and earn hard currency which can be its leverage against an uncertain future. For instance, UAE just signed a deal with South Korea to give it guaranteed "priority access" (meaning first before others) and "joint stockpiling" (for world market) of 24 million barrels. Other countries in Asia who have storage capabilities are also "tripping over each other" to cut similar deals with UAE. This is once-in-a-lifetime opportunity not to be missed.
3) Discontent with OPEC/OPEC+ and its members since the current conflict has made it clear that nobody will come to its aid when the chips are down (other than the US). It is "every man for himself" now and thus UAE has decided to chart its own independent path.
This is very welcome news and i hope other OPEC/OPEC+ members will also follow suit in their own national interests.
1) The pipeline to Fujairah has capacity of 1.5m barrels per day, i.e. less than hald of UAE's current oil production.
They still need Hormuz badly.
2) They can gain by increasing their production, IF they can get that out through Hozmuz. And IF (after Hormuz is opened) other OPEC+ countries DO NOT decide to do the same and the price of oil collapses.
3) US did not meaningfully came to their help. The high-end air defense systems were reserved/moved to Isreal. They mostly defended themselves, with the stuff they bought over the years from the US. A slightly cynical take would be 'classic protection racket'.
4) The national interests of other OPEC members are best served by being united against greater forces from outside region, not by fracturing and bickering among themselves. This is classical divide and conquer.
an interesting variable in all this is China. the whole crisis, and maduro being kidnapped by his american counterpart dictator, has left them only russia left as a major source of petroleum overseas.
If I had to guess, the UAE is looking to form petro-alliances, and have a negotiating leverage. They're have to compete, and they can't beat saudi. So, either the US caters to their demands, or they'll be forming alliances with india and china, where currently OPEC's price setting was a limiting factor.
Counterintuitively, I see modern OPEC as mostly net-positive for the West because business and government most cherish stability which OPEC helps provides (emphasis on helps).
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.
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.
Ok I was initially thinking this would be good for oil prices since they are leaving a cartel, but the article is saying this will just create more uncertainty. Seems we are damned if we do, damned if we don't these days.
> Ok I was initially thinking this would be good for oil prices since they are leaving a cartel, but the article is saying this will just create more uncertainty.
Where does the article say that? It says this is expected to lower the price of oil.
It also says that, because the price of oil is currently unstable, the impact will be difficult to see:
> Mazrouei said the move, in which the UAE will also leave the OPEC+ grouping, would not have a huge impact on the market because of the situation in the strait.
But it doesn't say anywhere that there's uncertainty over in which direction this moves the price of oil. The uncertainty is over what the price of oil will be.
Since covid, either way and whatever the event is, it will always be used to increase the prices on consumer’s goods: war, tweets, a giraffe died in Nairobi, it doesn’t matter, prices will go up and never down! It won’t stop unless people, the normal average people, go out in streets rioting against that.
> The UAE's exit from OPEC represents a win for U.S. President Donald Trump, who in a 2018 address to the U.N. General Assembly accused the organisation of "ripping off the rest of the world" by inflating oil prices.
I can't see how it is actually a win for Trump. OPEC has mostly been a big partner with the US. They are the ones that have mandated using the dollar as the baseline currency for buying and selling OPEC oil.
The UAE's exit almost certainly signals they are planning on selling oil in other currencies (probably the Chinese yuan). It's also a sign of the UAE wanting out of the partnership it's enjoyed with the US and it's allies.
> OPEC has mostly been a big partner with the US. They are the ones that have mandated using the dollar as the baseline currency for buying and selling OPEC oil.
Has anyone ever quantified the benefit the U.S. supposedly gets from dollar denominated oil? How does that compare to the cost to the U.S. of paying cartel pricing for oil? Given that the U.S. is a huge oil consumer, surely the cost to it of cartel pricing in oil is huge.
Paul Krugman consistently claims that there is not much benefit from it that would be visible in data. That seems to me consistent with what economists say in general.
If there is benefit it is small. It is mostly symbolic - petrodolar is a symbol of a power and people react to it.
In fairness to the UAE, of all the nations of the world, they're the ones who have lost the most economically speaking in the current unpleasantness.
It's kind of unfair.
If they can recoup some of those losses selling outside the system in Chinese currency, (or even in US currency), I have to imagine that would provide some ameliorative relief. It won't make them whole. They've got a lot of problems right now. But I mean, at least it starts them filling back in the giant hole that everyone else dug for them.
Of all the nations of the world, the one that has lost the most (at least in the short term) is clearly Iran.
On the other hand, from the longer term point of view, it looks like big part of the business model of UAE/Dubai (a safe, luxury place for rich) has been shattered and I don't see it coming back.
In the short term, they might want extra revenue, but in the long term, creating extra tensions with their neighbour can't be good.
> I can't see how it is actually a win for Trump. OPEC has mostly been a big partner with the US.
I mean, I don’t even know if I mean this sarcastically anymore, but are we sure that Trump and the US’ interests are aligned? I think something can be a win for Trump and a loss for the USA.
There are quite a few "clean energy" ETFs (e.g. GRID, PBD, ICLN). There are nuclear/uranium themed ones too. No comment/view on whether any of those are good or not.
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.
Iran lets oil traded in Yuan to navigate the Strait. OPEC sets prices in Petrodollars. What is the point of staying in OPEC then? Qatar is not part of OPEC so they were able to trade freely in Yuan.
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.
Context:
(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...
Shouldn’t UAE be upset their entire economy has absolutely rammed by the war started by Israel? At least the Saudis have pipelines - UAE is fucked
It's more complex than that.
Saudi Arabia has the East-West Pipeline [1] that takes ~7Mbpd (million barrels per day) of oil to Red Sea ports to avoid the Strait of Hormuz. They were already using it so there's not a lot of extra capacity they can get out. If we continue up the escalation ladder, the next big risk is that the Houthis close Bab al-Mandab, which is a not-quite-as-narrow but still vulnerable chokepoint to the Red Sea.
The UAE has the ADCOP (Abu Dhabi Cross Oil Pipeline) [2], which takes ~1.8Mbpd to the Gulf of Oman. This is beyond the Strait of Hormuz but not that far so technically is still vulnerable to drone attacks (in particular) from Iran if, again, we climb the escalation ladder.
The real issue is American security guarantees to GCC nations have been shown to be an illusion. Heck, the US can't protect their own bases in the region. Also, the US can't protect maritime traffic through the Strait. I mean this is in all seriousness: there is no military solution to this problem short of the use of nuclear weapons.
That means we are now in a situation where the US has to either split with Israel and offer Iran significantly better terms than they had before the war, likely including the lfiting of economic sanctions, or the US has to sit and watch the world plunge into recession and Asian countries in particular are going to burn. And who knows what a prolonged impasse will do to Europe, particularly come winter.
So far, the US seems to prefer letting the world burn rather thans plitting with Israel.
A protection racket ceases to be a protection racket if it no longer offers protection.
[1]: https://en.wikipedia.org/wiki/East%E2%80%93West_Crude_Oil_Pi...
[2]: https://en.wikipedia.org/wiki/Habshan%E2%80%93Fujairah_oil_p...
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The UAE is over-collateralized. They can sustain such a conflict for a very long time.
davidf18 your post (and all your recent posts) is flagged dead.
UAE is the third largest producer in OPEC, and has options to avoid the straight, yet Their economy recently get shocked though by the war they wanted to avoid
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> Shouldn’t UAE be upset their entire economy has absolutely rammed by the war started by Israel?
It's pretty convoluted logic to blame Israel for Iran attacking the UAE.
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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).
[1] https://m.youtube.com/watch?v=IgD7zmJN3_A&pp=0gcJCVACo7VqN5t...
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Best of luck! These proxy wars have existed since the days of Assyria. 3000 years and running.
Kind of depressing thought actually.
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I think there are only 3. Houthis (iran), PLC (saudi), and STC (UAE).
I guess Al-Qaeda and Isis are also there.
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In the Middle East everyone fights with everyone else and everyone is in covert or open alliance with everyone else. Simultaneously.
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Saudi Arabia and Somalia agreed upon military cooperation early this is year. Egypt and Turkey are in this axis as well. Somaliland was recognized by Israel late last year. UAE and Ethiopia are on this axis. Part of the endgame might be lifting the Middle East from a transit zone to a logistics hub.
You are missing this interesting, and confidential until now, deployment of Israeli forces in UAE:
"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...
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.
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I think it's not so much that they don't have liquid assets they can sell.
The issue is those liquid assets are US Treasuries and US public market equities (mag7 etc.).
They don't really want to sell them, and they also know that the US really doesn't want them to sell them - the last thing Trump wants heading into the midterms is an S&P500 bear market and 10y treasuries heading back to 5+%.
So they ask for a swap line and they're negotiating from a position of strength, the US doesn't have much of a choice but to give them as much as they need and damn the consequences
This kind of cooperation is not unprecedented, for example they've collaborated in the occupation of Socotra.
Sometimes foreign aid is good, other times it's bad.
"Emirati-Israeli axis"
I'd add the US to that as well. Both the UAE and Israel are highly (practically solely) dependent on US for their military tech and supplies.
> 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.
So yes, the UAE could align with both.
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They're not buddies per se, but Egypt was the first ME country to normalize relations.
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Egyptians and Israelis hate each other, not their governments. They're on friendly terms relatively speaking.
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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
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As I recall, it was Saudi Arabia that largely bank rolled Pakistan's "not party to the Nuclear Non-Proliferation Treaty" weapons program [Ω](?) .
[Ω] https://en.wikipedia.org/wiki/Pakistan_and_weapons_of_mass_d...
So there's that.
> ... bank rolled Pakistan's not party to ...
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?
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We all live in a yellow cake submarine..
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.
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Thank you for this analysis! MSM doesn’t seem to be covering this and it’s hard to know what’s going on if you’re not familiar with the region.
> Egypt
Already aligned with the KSA [0]
> India
Already aligned with the UAE [1]
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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...
> Egypt is aligned with the 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.
[1] https://www.washingtoninstitute.org/policy-analysis/egypts-t...
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OPEC has long been Saudi Arabia reducing output, and everyone else selling everything they can. They haven't had much power since the 1970s, but that they exist means they are a threat that if everyone else actually stuck to the agreement for a change.
This is the common problem for cartels: everyone has inventive to cheat on the deals made. By selling a little more than your share you get more money, while because everyone else is following along the prices are higher. (see also prisoners dilemma)
Repeated PD is very different. The whole point of a cartel is that everyone inside is incentivized not to cheat, and it works as long as they agree on what's fair. The problem for cartels is people not in the cartel.
It’s well known that some OPEC members cheat nonetheless.
https://en.wikipedia.org/wiki/Tragedy_of_the_commons
Tangent but: this is also why reducing greenhouse gas emissions is hard.
As long as fossil fuels remain one of the cheapest easiest to scale ways to make power, there’s a similar incentive to cheat. If everyone else cuts emissions and you don’t, your margins are higher and you can undercut them. Global reductions require an all-cooperate scenario.
Developing nations have the strongest incentive to cheat since they need those margins to catch up.
Which is why I think little progress will be made until other sources are actually cheaper. Until then it’s beyond us politically. We can’t get all nations across the world to simultaneously cooperate at that scale.
> As long as fossil fuels remain one of the cheapest easiest to scale ways to make power, there’s a similar incentive to cheat. If everyone else cuts emissions and you don’t, your margins are higher and you can undercut them. Global reductions require an all-cooperate scenario.
IMO economics always wins. You're never going to see an all-cooperate scenario.
You will see an all-compete scenario, so constantly reducing costs for alternatives is key but you also have to find a way to ensure that the producers can win economically too. This is the conundrum.
If solar panels get cheap enough to create high demand, then that demand has to carry through the process of manufacturing, installing and maintenance. Every time I read that solar has gotten even cheaper, I start calling for quotes to install them at my house and the prices are borderline obscene. Same for geothermal last time I needed to update my HVAC.
I want solar and geothermal to work but the economics are a challenge.
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Agreed - the good news is, in many circumstances renewable energy is cheaper for new energy capacity. As long as regulations move in the right direction, we are likely to see the global energy mix move towards renewable sources over time
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There are economic mechanisms for this (e.g. https://en.wikipedia.org/wiki/EU_Carbon_Border_Adjustment_Me...) but broadly, yes, it is difficult.
So little political will is needed at this point as the economics now favor renewables. Unfortunately most of the political will seems to be leaning towards protecting the more expensive fossil fuel sources of energy.
Renewables (particularly solar) already are cheaper [1].
It's political will not economics that keeps us addicted to fossil fuels. Nobody gets rich from solar panels. You build them. They produce power. Oil wells like any mine are huge wealth concentrators. That's the real problem.
If anything, a bunch of countries (particularly those who are net oil importers) are re-evaluting their energy dependence given that the compact that the US will guarantee maritime transport has essentially been broken.
[1]: https://www.iea.org/reports/projected-costs-of-generating-el...
Isn’t solar already cheaper?
Saudi are staying and UAE is leaving because they want to pump more.
They want to pump more than they can hide, so they're leaving.
I don't know where this idea that OPEC is toothless came from but it's objectively incorrect. Counter example: OPEC was the single largest factor in the inflation shock of 2020-2022. And nobody talks about it.
In March 2020 at the start of the pandemic, it looked like the world economy would come to a standstill. Oil futures went into extreme contango, briefly going negative as nobody was taking delivery. So in April 2020 the Trump administration went and browbeat all the OPEC+ members to massively slash production [1][2][3]. Art of the deal. This culminated in a 2 year deal to cut production by initially 9.7Mbpd (million barrels per day) and then reducing over the 2 year period [4]. This was a disaster.
For context, OPEC does this sort of thing by themselves without any kind of prompting when necessary. They meet every 3 months and project demand and then set production targets to maintain a floor and ceiling for oil prices. Individual members can and do cheat, producing more than their allocation and lying about production cuts but all in all the system mostly works.
Trump loses the election. Biden comes in and demand rockets back in 2021 and crude oil prices skyrocket, as do gas prices as a result. The Biden admin quietly went to MBS to ask him to end the deal. He refused. You can overlay this 2 year deal with global inflation and it pretty much matches up exactly.
So Republicans blamed inflation on Biden even though it was a Trump deal. The Democrats didn't abandon US foreign policy and publicly hang out an ally to dry so instead just blamed greedy oil companies for price gouging. And nobody at all mentioned the 2020 OPEC deal. Not in mainstream politics anyway.
That was a 10% cut in global supply and look what it did to inflation. Closing the Strait cuts global supply by 20%. In 1973 with the Arab oil embargo, the major recessionary effects took 6 months to really hit. This is a ticking time bomb that will likely explode leading into the midterms.
Anyway, the point is OPEC+ did that.
[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...
[4]:
Ah, didn't know this, thanks. Republicans always lie, this isn't surprising.
This is interesting and under-reported. But it doesn't mean that oil would've spiked a lot less without the OPEC cuts, and that's not the same as gasoline costs which depend on refineries too.
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Isn't the solution in game theory when there are multiple turns to just repeat the move the previous person made.
So if the other side overpumped by x1 amount then you pump an extra x1 the next turn / year (maybe multiplied some reference production factor as they don't all have the same absolute limits).
Simple game theory doesn't work in the real world. In the short term most OPEC+ members other than Saudi Arabia have very limited technical ability to significantly increase or decrease production. It's not like they have a big valve that they can open or close at will. For many oil wells, restricting flow would actually damage the geologic substrate. And drilling new wells (including all of the supporting infrastructure) can take years.
Tit for tat (start by cooperating, and for each subsequent choice do what your opponent did last turn) is the optimal for repeated 2-party prisoners' dilemma.
The real world is much more complex. OPEC is a multi-party game, for starters. For another thing, there are cascades of social/political problems that get in the way of optimal strategy at the level of nations. I.e. that only works if politicians are more interested in solving problems than controlling narratives or maintaining power. Unfortunately, an ineffective leader can be sustained by controlling the narrative, while an effective leader can be destroyed by lack of control over the narrative. And one of the best ways to control a narrative (especially if you aren't a very good leader to begin with) is to create so much chaos that it distracts from your shortcomings, and blame the chaos on enemies.
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Not always. In a simple game yes, but sometimes the game is more complex and so it is to your advantage to play even when you know others will defect.
Then they all pump more every year
"My grandfather rode a camel, my father rode a camel, I drive a Mercedes, my son drives a Land Rover, and my grandson is going to ride a camel". Sheikh Rashid bin Saeed Al Maktoum, the former Emir of Dubai.
I get the sentiment but this is not a real quote
https://factcheck.afp.com/sheikh-mohammed-did-not-say-great-...
It would be quite out of character for him to say this
Its a fun line, but the volume of money they have and the way its managed says they are looking at retaining that wealth somehow
Well yes, that is because they have heard the line and took it as a warning.
However just because they are trying doesn't mean they will succeed. Their attempts at diversification still seem very reliant on oil money, and its far from clear that they will eventually be able to stand on their own.
Their whole investment castle is built on sand (pun intended) and when oil even remotely starts to fade out as a commodity, it will crumble instantly. Panic will ensue and corruption will be rampant in order to continue the lavish consumerism. Everything will be sold for pennies. The difficult thing is not to make money once, it's to keep them afterwards.
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Money retrained means nothing when cheap oil is gone. Cars are only a thing because we have volumes and energy for large supply chains and scale. A rich person can afford a model-T level car, but large parts of what makes a luxury car are things that they won't be able to get at any price without modern industry that is built on distributed wealth for many people. All the electronics - needs industry. Precision manufacturing - depends on precision electronics. You can't even rebuild a current design if someone thinks to print out the blueprints.
Of course who knows how to end of oil will happen. Best case is a switch to renewables (or fission...) in which case there will be more than enough expensive oil for a few rich people to drive expensive gas cars if they want to. There are lots of other options as well, only time will tell.
(and a nod here to the replies who suggest this was never actually said)
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The 3 generation cycle has proven to be true in the past but families are smarter today.
Retaining wealth is the easy part, retaining political power is hard. They don't want to be regular jetsetting billionaires, they want to rule their own domain. And in order to do that, they need to figure out how to make people want to keep living there.
Money solves a lot, but not everything. At the end of the day it's still a country in a desert. Unfortunately that entire region is a repeating history of temporary wealth and stability that gives way to instability. When that happens the underlying constraints can quickly reassert themselves. Just luck at the history of Kuwait.
The point of the line is not that they aren't going to try, it's an acknowledgement of the extreme challenge in diversifying in the short term and incentivizing the next generations who are very, very comfortable with the status quo to build other income streams in the long term.
Where is the Land Rover supposed to sit on this scale?
There are current Land Rovers with market positioning suggesting they're "better" than Mercedes, and there are historic Land Rovers which were arguably not much better than camels.
Only a little bit of time in the ME but the Land Rover is likely considered higher status.
Camels are cool still.
To my mind, it's still an automobile, but not a posh one. It's like "I wear a suit with a necktie, but my son wears fatigues".
That's a quote. You may want to ask Sheikh Mohammed (current ruler of Dubai) for why his dad was mocking him for his choice of a car. I just posted the quote - felt relevant.
I've heard mechanics can send their kids to college servicing Land Rovers.
And where is the Jaecoo?
like off-road capable, albeit still luxurious?
Would say Land Rover is considered more expensive than Mercedes
The US has long sought to erode OPEC’s ability to dictate global oil prices. The US has made massive progress in being broadly energy independent to isolate it from challenges elsewhere. The US has been a net energy exporter since 2019. Global oil pricing was always an annoying thorn in that strategy.
This is an initial but big crack in shaking up global oil markets in a way that meaningfully shifts global power dynamics.
They export because their own refineries along the Gulf coast esp were designed for middle east heavy crude cuz the US once upon a time believed it was about to run out of American light sweet crude. So the story is not black and white.
Stop repeating this lame talking point like a robot. We export because the crude oil export ban was lifted in 2015. If we didn't then we would already have the refinement capacity now.
There are financializing vampires in charge and their only goal is to short term bleed the country dry. "Investors" are allergic to investing.
Cheap and plentiful fossil fuels.
We’re rolling back CAFE standards too.
CAFE standards were always a stupid idea. If we want to reduce fuel usage then increase the tax on fuel instead of punishing manufacturers for selling vehicles that consumers want to buy.
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Always gonna happen. Oil margins are gigantic and they'll use every dime of runway they can. Electric is better in every single way and batteries tech is only making that more true every day. The dinosaurs won't go quietly into the night.
I think the initial crack was ousting Maduro in Venezuela. Since OPEC exempts Venezuela from production caps, it gives the US government a lever on non US production.
Venezuela produces heavy "sour" crude (this means high in sulfur). Many of the US refineries capable of handling sour crude have closed, partly because the sulfur content makes the refineries stink (and emit lots of pollution) and partly because they need more expensive piping to handle the corrosive materials (not just the crude, but HF acid that's used in the refining process).
The last refinery to be built in the US opened in the 1970s. Since then, refineries have closed. None of the owners of refineries will sell them because of SuperFund legislation. It is the same reason that when a gas station is sold, the fuel tanks are dug up and replaced. This way, there's no way to claim that the previous owner left hazardous material to be cleaned up. SuperFund laws say that every previous owner is liable for the cost of cleanup. It doesn't matter how long ago the property was sold.
2017 when Venezuela accepted RMB for oil and then USDT crypto. USDT is being used to skirt the US's control of the oil and bypassing the dollar.
The ships passing through the straight now are also paying Iran in RMB and crypto.
The petrodollar is the objective.
This isn't over any time soon
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This is horrible from POV of mitigating the climate catastrophe and the global death toll. We (as in humanity) are really late in ramping down fossils production and use.
Eh if the U.S. gets into a forever war with Iran the same way we did with Iraq and Afghanistan and Vietnam (or like how Russia got into one with Afghanistan and Ukraine), the climate crisis is solved. Five years of the Straight of Hormuz being closed and everybody will be using EVs.
Legislation isn't going to work. Economics isn't going to work. War - which cuts off the flow of petroleum because nobody is willing to risk their life for oil - will work very quickly. Nothing quite like a shortage to spur innovation.
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The US isn't insulated from global oil supply shocks because crude oil and refined petroleum products are traded on global markets and natural gas is somewhat traded on global markets (there are limits to LNG exports).
So yes the US could limit or ban exports. Many countries (including China) have done this in a kind of energy nationalism, but that hangs out allies to dry in a way that would make the US deeply uncomfortable. It would threaten European energy security. It would come at the cost of Latin American exports. So there's a cost to pay.
And more to the point, no US government regardless of party is going to hurt corporate profits by limiting exports. Biden could've done it in 2021-2022 and didn't. And Trump certainly won't. As one example, a big release from the SPR was on an oil-for-oil basis. Rather than cash ii on high prices, it's just a massive gift to oil companies who have to repay the oil (and then some) at some unspecified future point when oil will be cheaper. That's billions the US could've added to government coffers.
I do agree there is a power shift going on but not because of US energy independence. No, it's because the US cannot militarily protect GCC countries and cannot force open the Strait of Hormuz or guarantee global shipping, which has essentially been a US guarantee since 1945.
I do think this administration does want to crack OPEC but that's likely to be of massive benefit to China without China having to do anything.
Global pricing affects all fossil fuels and always will. Energy independence will remain a fantasy until we are fully on renewables. Which is entirely within reach and requires fighting zero wars.
...and up to that point, first world countries should not be complaining about developing nations using coal. It's a lot more shock resistant than diesel and natural gas, which is especially important for those that are so much more sensitive to inflation. From what I've seen coal, solar (hydro too, but that's land-dependent) and micromobility are save harbors. Not much they can do about the fertilizer shortfalls though.
The US/China trade war is intensely relevant to the large scale deployment of renewables in the US.
It's the other way around: Renewables will remain a fantasy until we achieve energy independence.
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The US, or Saudi Arabia, or Venezuela, or Russia could very well be energy independent on fossil fuels alone, even though that won't be wise.
Europe, or China, or India could not though.
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Geopolic: A US-aligned Gulf state walking away from a Saudi/Russia-led bloc in the middle of a war, after deciding the bloc didn’t really have its back
Economic: it weakens OPEC’s pricing power in a way you might not see right away if Hormuz is closed, but it could really change the supply picture once things reopen
UAE announced this week they might start selling oil in yuan so this doesn’t read like anything US aligned to me. If anything it reads like the opposite to me - a move away from traditional opec petrodollar system
> UAE announced this week they might start selling oil in yuan
That is just UAE pressure to make sure they get their dollar swap deal: https://www.reuters.com/world/middle-east/trump-says-currenc...
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exactly. this sounds like a third path where the UAE charts its own course, and that course increasingly looks paved in Yuan.
OPEC cartel membership didnt gain it access to Hormuz, and the US petrodollar promise to protect UAE states from aggression in exchange for trade in USD could not be upheld.
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“Might” and either way breaking OPEC is good for the West, regardless of their intent
defecting from the cartel, a tale as old as time
Im not concerned with them selling with the yuan as China regularly screws around with its currency. The bigger issue is and other currencies which reduces the US impact.
On the backside I’m sure there will be lots of fun back door deals around all those interceptors and future anti drone technologies. Today though the US has been the impetus of a lot of the current issues.
>UAE announced this week they might start selling oil in yuan
I have read this headline dozens of times in the previous 30 years.
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Is "polic" a word?
Russia-led? Russia isn't even part of OPEC.
I believe they are in opec+
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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.
Besides, nobody actually follows the OPEC limitations.
It means the UAE is pissed Iran attacked it then tried to block all passage through UAE controlled waters.
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.
> ~1.8Mbpd (million barrels per day)
Mbpd = thousand barrels per day, MMbpd = million barrels per day
> so is only a fraction of the UAE's total oil exports
Isn’t it 30-50%ish depending on how you count it? Calling it “a fraction” makes it sound much smaller in conventional English.
They might be leaving either for a) price independence or b) currency flexibility.
OPEC doesn’t enforce currency or monetary policy rules.
Do they? I just looked at a map and I see very little oil infrastructure on that side of Hormuz plus isn't Oman Iran aligned?
No expert but I always got the impression Oman was a neutral party. They help run the Hormuz with Iran but largely neutral in world politics.
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
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Fujairah, on the other side of Hormuz is the fourth largest bunkering hub in the world. That’s not “little oil infrastructure”
They do, it's only like 1-2 million barrels a day in capacity right now.
Oman is the Switzerland of the Middle East.
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You should visit Fujairah ! Huge facilities there.
https://en.wikipedia.org/wiki/Habshan%E2%80%93Fujairah_oil_p...
That would also explain why UAE is oddly in favor of a war in their region.
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.
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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.
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The US is bombing cities.
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US-backed Israeli forces are already destroying Lebanon: https://www.msn.com/en-us/news/world/mapping-the-destruction...
> 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
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UAE is responsible for 12-13% of OPEC output as its third most productive member.
In 2019 Qatar left OPEC, but nobody cared because oil is less than 10% of their national fossil fuel output, which was about 2% of OPEC's oil output.
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:
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.
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.
Does being a member of OPEC affect that at all?
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.
[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...
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.
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.
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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.
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I see this as a temporary action to contain oil prices, orchestrated by the US.
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.
> I see this as a temporary action
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
The cartel can't even self police. These are like climate pledges.
> 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
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.
Financial Times: "There’s no such thing as the petrodollar"
https://www.ft.com/content/be345914-7b4b-4264-bcbd-6e5e33b79...
https://archive.is/4rn8t
I am personally convinced that there are many more people pretending to understand geopolitics than people who actually understand. It could be that no one truly understands due to the amount of fractal complexity and emergence.
seriously. instant indicator that their world view is irreversibly warped by tiktok politics.
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's not that the petrodollar is doomed, it's just 'devaluing'. The US isn't a stable, safe place for cash anymore. But the world still needs massive amounts of safe cash. So there really is only one alternative: diversify.
They'll diversity into Gold, rare-earth metals (they're only getting more important), CIPS, Yuan, Euro. That diversification helps everyone else, but will hurt the US, which hurts financial markets, and thus everyone else. And once they're all divested, the diversification will add risk and losses. Can't be helped though, they still need security. So we're looking at a generation of slow global decline, probably propped up slightly by the industrialization of AI (which of course China is leading the world in, as nobody cares about "better", they care about "cheaper"). China is the real winner, because all they need is oil, and their partners will make sure they get a steady supply (because it's in their partners' interests; that's what having allies is all about).
US can't stop this; their military isn't equipped to fight wars on multiple fronts, their lumbering, expensive weapons can't be sustained in a protracted conflict, their wars aren't popular at home, and they don't have the manpower. Even when they eventually start the draft back up it'll take years to build up their warfighting capabilities, and by then the world will have diversified enough that they can take the hit. (The US will try a World War anyway to try and retain the Empire, because their leaders are psychotic morons and their people are compliant, but they'll still lose. (Historic parallel: Sparta. Great military, but tiny, so most of their power came from wealth and tenant states; eventually the rest of the mediterranean got tired of their shit (installing dictatorships, alienating allies) and their empire died. Hell, even their Navy was paid for by Persia - foreign investment used to weaken rivals via proxy war))
I don't think this is avoidable. Nobody trusts the US now. The divestment has already begun. Countries aren't suddenly going to change their minds - even if Trump doesn't overthrow the government to cement this new status quo in 2028 (which he 100% will), the next President could be another Trump. Nobody wants to be subject to their insane policies (foreign & fiscal) anymore. So the US isn't a secure place for cash. Nations aren't just going to shrug and ignore it, they're going to act to protect their interests.
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Coincidently, FTAV posted a good "petrodollar" article today for anyone interested (article is free but might need a free account to read it): https://www.ft.com/content/a65efb54-306b-49ad-9920-40d59b195...
Wow, this is a great share. I am regular reader of FTAV. I highly recommend it to others here.
I like this part:
And:
A lot of online armchair analysts miss the fact that the Euro is just as important as the US Dollar in global trade. The Eurozone has a combined GDP of about two thirds of the US. That is huge! And they Eurozone does lots of trade with countries outside the Eurozone, so the Euro is a vital part of the global economy. The number one forex pair globally is EUR/USD. It is trivial to convert between the two (tight spreads, giant order capacity), so buyers and sellers are fine with either.
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.
> it'll happen by Q1 2027
Which month?
Petrodollar discourse tends to annoy me because people tend to get cause and effect confused.
The dollar isn't strong because oil is traded in it. Oil is traded in dollars because the dollar is strong. What makes the dollar strong? The US military and, at least up until now, the US essentially guaranteeing global maritime trade. Oh and the US also being the world's arms dealer. Why this is such a huge strategic blunder is because the US has proven itself unable to militarily open the Strait of Hormuz. This should surprise precisely no one. The Joint Chiefs knew it. The Intelligence community knew it.
Let me put this another way: you could make all oil trades in euros tomorrow and pretty much everyone would still hold dollars and convert to euros as needed. People don't understand this so you get silly conspiracy theories around, say, the Iraq War being started because Saddam Hussein was starting to trade oil in euros.
Let me give you a concrete example of this all in action. Iran has threatened to charge tolls to pass through the Strait and they wanted to be paid in crypto, largely to avoid having their funds frozen (as has already happened) because the US has that kind of control over the financial system. But that's still a problem because all US companies and any financial institution that wants to main access to the global financial system isn't legally allowed to trade with Iran, even in crypto. My point is that all of this could be traded in crypto and it wouldn't matter. The "petrodollar" would still rule.
You say "people tend to get cause and effect confused" and then unironically follow that up with:
> What makes the dollar strong? The US military
The US military and the dollar are strong because the US economy is strong.
Is there an explainer on this? I'm not familiar with the geopolitics or oil cartels well enough to understand the implications here.
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.
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> 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.
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That’s similar to unions in general, but of course workers unions was the first thing out of the hat.
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.
> OPEC is a cartel of Arab oil-producing countries
"In 1949, Venezuela initiated the move towards the establishment of what would become OPEC, by inviting Iran, Iraq, Kuwait and Saudi Arabia" ...
> OPEC is a cartel of Arab oil-producing countries, including UAE.
Nigeria joined OPEC in 1971.
> its demise.
OPEC or UAE?
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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.
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The UAE is trying to expand its ability to ship oil through Fujairah, so this could potentially undermine both KSA/Iraq and Iran.
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.
Didn’t we see reports that Saudi Arabia was supporting and pushing Israel and U.S. to attack Iran?
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The goal is a full regional war orchestrated by Israel. That's what is playing out here.
Slowly weakening remaining Arab states and setting them up to fight each other.
The various Arab tribes or kingdoms had a long and bloody history of fighting each other going back before Israel even existed.
Can somebody knowledgeable help me understand why this is in the interests of the UAE? Also, seems like a moot point since the strait is closed. Why do they think it’s in their best interests, and why now?
Just my hunch but Iran is a founding member of OPEC.
The UAE has had a long standing land dispute with Iran.
The recent barrage of missiles might have just pushed the UAE leadership to have lost patience with their northern neighbor.
This might be an act of protest.
Probably Saudi Arabia is more important in OPEC, so that might be actually a middle finger to SA. Saudi Arabia and UAE had a recent dispute in Yemen that went pretty hot.
An alternative is the US trying to dismantle OPEC together with its new found supply in Venezuela to drive prices down
It was initially more union-esque to prevent being played off against each other and a dash of ideology. Then it became a cartel with the goal to to increase income / stabilize the market as well as a general international-economic-political forum because so much of their economies depend on oil.
Production limits were always a bit shady. Most meetings were just nations declaring what they'd (be able to) do and then a lot of talking to maybe see if things could be tweaked a bit and come up with a statement that made it look useful.
Their last 'success' was before Russia-Ukraine where they basically tried to suppress the price to make US shale too expensive and reduce its market share. Which happened. But again, debatable to what extend by OPEC's influence while they do write their own press release - with the explicit goal that the perception of power increases the price more.
Currently the entire region is going up in flames and allegiances are being stressed to breaking point.
The UAE leaving - as far as i can tell - is just a middle finger telling some of the club members its a farce and useless when it comes to its goals and (soft) powers, in the new reality of war & US export dominance. The middle finger being a political signal as everyone seems to be in disagreement on how best to handle the Israel-US-Iran war.
They don’t have production limits anymore, and can produce and sell as much oil as they have capacity for.
Ok but:
- why now? What has changed that made the lack of limits more attractive than it used to be?
- despite no limits, the strait is blocked, so they still can’t sell anything?
1) The UAE has its "Abu Dhabi Crude Oil Pipeline" (see https://en.wikipedia.org/wiki/Habshan%E2%80%93Fujairah_oil_p...) to Fujairah export terminal on the "Gulf of Oman" bypassing the choke-point of "Strait of Hormuz" entirely. Given the current blockade of the strait and its uncertain future, Fujairah is now central to crude oil shipments for the World Market.
2) Thus far, the UAE has been prevented from maximizing its revenues due to OPEC/OPEC+ production caps which is no longer acceptable due to global needs. It can now chart its own independent course by ramping up production and earn hard currency which can be its leverage against an uncertain future. For instance, UAE just signed a deal with South Korea to give it guaranteed "priority access" (meaning first before others) and "joint stockpiling" (for world market) of 24 million barrels. Other countries in Asia who have storage capabilities are also "tripping over each other" to cut similar deals with UAE. This is once-in-a-lifetime opportunity not to be missed.
3) Discontent with OPEC/OPEC+ and its members since the current conflict has made it clear that nobody will come to its aid when the chips are down (other than the US). It is "every man for himself" now and thus UAE has decided to chart its own independent path.
This is very welcome news and i hope other OPEC/OPEC+ members will also follow suit in their own national interests.
1) The pipeline to Fujairah has capacity of 1.5m barrels per day, i.e. less than hald of UAE's current oil production. They still need Hormuz badly.
2) They can gain by increasing their production, IF they can get that out through Hozmuz. And IF (after Hormuz is opened) other OPEC+ countries DO NOT decide to do the same and the price of oil collapses.
3) US did not meaningfully came to their help. The high-end air defense systems were reserved/moved to Isreal. They mostly defended themselves, with the stuff they bought over the years from the US. A slightly cynical take would be 'classic protection racket'.
4) The national interests of other OPEC members are best served by being united against greater forces from outside region, not by fracturing and bickering among themselves. This is classical divide and conquer.
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Great news, I hope this will finally crash russia, just like the same events back in the 80s caused soviet empire collapse.
an interesting variable in all this is China. the whole crisis, and maduro being kidnapped by his american counterpart dictator, has left them only russia left as a major source of petroleum overseas.
If I had to guess, the UAE is looking to form petro-alliances, and have a negotiating leverage. They're have to compete, and they can't beat saudi. So, either the US caters to their demands, or they'll be forming alliances with india and china, where currently OPEC's price setting was a limiting factor.
> has left them only russia left as a major source of petroleum overseas.
China is currently importing 1.6M barrels/day from Brazil
Counterintuitively, I see modern OPEC as mostly net-positive for the West because business and government most cherish stability which OPEC helps provides (emphasis on helps).
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.
> Without a healty cartel, oil is doomed
Why/how?
Without a healthy cartel, wouldn't prices go down? Cheaper oil means less adoption of alternate energy sources.
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.
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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.
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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
how is the cartel not healthy? uae is 12%
> 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.
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archive for the Reuters article
https://archive.ph/uSXJx
Is this as a function of the Iranian war?
I think they just want to pump as much as they possibly can to cash out now while they can.
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...
They also build out more nuclear power than all of the west comnined: https://en.wikipedia.org/wiki/Barakah_nuclear_power_plant
Earth is going to run out of oil in 50 years at current rates. One way or another, the status quo is going to change.
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UAE/Saudi tension over quotas predates it by years, but certainly gave a good excuse to execute leaving.
Worst case for the Middle East - OPEC is disolved.
The US is bailing out the UAE for liquify issues and this is likely a quid pro quo in return??
Well, it looks like the return on investment for that 747 bribe is pretty bad.
It was given by Qatar not the UAE.
They represent 4.5% of oil production it seems. It will be interesting to see what this means longterm.
"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.
Probably not much unless others follow suite.
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.
4.5% most likely capped to meet OPEC agreements. There's no ceiling now (although, it will obviously not be 100% or even close).
Ok I was initially thinking this would be good for oil prices since they are leaving a cartel, but the article is saying this will just create more uncertainty. Seems we are damned if we do, damned if we don't these days.
> Ok I was initially thinking this would be good for oil prices since they are leaving a cartel, but the article is saying this will just create more uncertainty.
Where does the article say that? It says this is expected to lower the price of oil.
It also says that, because the price of oil is currently unstable, the impact will be difficult to see:
> Mazrouei said the move, in which the UAE will also leave the OPEC+ grouping, would not have a huge impact on the market because of the situation in the strait.
But it doesn't say anywhere that there's uncertainty over in which direction this moves the price of oil. The uncertainty is over what the price of oil will be.
Since covid, either way and whatever the event is, it will always be used to increase the prices on consumer’s goods: war, tweets, a giraffe died in Nairobi, it doesn’t matter, prices will go up and never down! It won’t stop unless people, the normal average people, go out in streets rioting against that.
Even if the UAE increases crude oil production, wouldn’t it have little impact on oil prices if the Strait of Hormuz isn’t open?
is there a vested interest for usa and our war partner ?
This is titanic, earth shattering news. The breakup of the OPEC cartel would be on the best things to happen to humanity this century.
> The UAE's exit from OPEC represents a win for U.S. President Donald Trump, who in a 2018 address to the U.N. General Assembly accused the organisation of "ripping off the rest of the world" by inflating oil prices.
I can't see how it is actually a win for Trump. OPEC has mostly been a big partner with the US. They are the ones that have mandated using the dollar as the baseline currency for buying and selling OPEC oil.
The UAE's exit almost certainly signals they are planning on selling oil in other currencies (probably the Chinese yuan). It's also a sign of the UAE wanting out of the partnership it's enjoyed with the US and it's allies.
OPEC has no rules requiring its members to sell oil in US dollars. Iran and Venezuela are members of OPEC.
> OPEC has mostly been a big partner with the US. They are the ones that have mandated using the dollar as the baseline currency for buying and selling OPEC oil.
Has anyone ever quantified the benefit the U.S. supposedly gets from dollar denominated oil? How does that compare to the cost to the U.S. of paying cartel pricing for oil? Given that the U.S. is a huge oil consumer, surely the cost to it of cartel pricing in oil is huge.
Paul Krugman consistently claims that there is not much benefit from it that would be visible in data. That seems to me consistent with what economists say in general.
If there is benefit it is small. It is mostly symbolic - petrodolar is a symbol of a power and people react to it.
In fairness to the UAE, of all the nations of the world, they're the ones who have lost the most economically speaking in the current unpleasantness.
It's kind of unfair.
If they can recoup some of those losses selling outside the system in Chinese currency, (or even in US currency), I have to imagine that would provide some ameliorative relief. It won't make them whole. They've got a lot of problems right now. But I mean, at least it starts them filling back in the giant hole that everyone else dug for them.
Of all the nations of the world, the one that has lost the most (at least in the short term) is clearly Iran.
On the other hand, from the longer term point of view, it looks like big part of the business model of UAE/Dubai (a safe, luxury place for rich) has been shattered and I don't see it coming back.
In the short term, they might want extra revenue, but in the long term, creating extra tensions with their neighbour can't be good.
It will probably increase total global oil production, which is good for the US consumer (what Trump seems to care about more), but not US producers.
> I can't see how it is actually a win for Trump. OPEC has mostly been a big partner with the US.
I mean, I don’t even know if I mean this sarcastically anymore, but are we sure that Trump and the US’ interests are aligned? I think something can be a win for Trump and a loss for the USA.
Majority of US voted for Trump. Maybe not aligned with your version of US, but this is what the majority wanted
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It's a win for Trump in the pretty straightforward sense that it's something he publicly announced he wanted.
Whether he finds the overall effects positive or negative is a different question.
What's a good investment vehicle for broader energy transition?
There are quite a few "clean energy" ETFs (e.g. GRID, PBD, ICLN). There are nuclear/uranium themed ones too. No comment/view on whether any of those are good or not.
NEE, trades like a bond. They do financial derivatives with carbon credits (sorta)
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.
[1]: https://www.democracynow.org/2025/1/28/sudan
> 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.
how will they get the oil out of the Gulf?
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.
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UAE is toast, it's glitter was just influencers and glass in the desert, resting on the flow of oil.
Well, looks like that was the price for getting the USD swap line. Milkshake theory won't last long, just like the petro dollar.
Okay this I did not see coming... If it actually happens it's going to cause a alot of ripple in the energy market. Good or bad? Hell if I know.
Iran lets oil traded in Yuan to navigate the Strait. OPEC sets prices in Petrodollars. What is the point of staying in OPEC then? Qatar is not part of OPEC so they were able to trade freely in Yuan.
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.