unintentionally

The energy earthquake that caused the Third Gulf War has just claimed an unexpected victim: the unity of the oil cartel. As of May 1, the United Arab Emirates (UAE) will no longer be part of OPEC and its OPEC+ alliance. As reported by the state news agency WAMin Abu Dhabi consider that it is time to prioritize their “national interest.” After spending almost six decades making “great sacrifices”, the Emirati Government considers that stage over and prefers to fly alone, guided by its own “strategic and economic vision” far from the limits of the group. The context could not be more volatile. The Strait of Hormuz—through which a fifth of the world’s crude oil normally transits— is submerged in operational chaos due to Iranian threats and attacks, in addition to the US blockade of Iranian ports. As explained Reutersin this scenario of suffocation, the Emirates has decided that its energy future needs to maneuver without the ties of Vienna. The beginning of the end of quotas. The impact of this exit is tectonic for the oil market. As analyst Saul Kavonic warns in the BBCthis breakup could be “the beginning of the end for OPEC.” With the departure of Emirates, the cartel loses approximately 15% of its total capacity and one of its most rigorous members, leaving the organization weakened and with only 11 core members. The key to this divorce lies in production, since the Emirati authorities had been complaining for some time that the cartel’s quotas unfairly limited their exports. As detailed by Robin Mills, analyst consulted by the cnnOPEC kept the Emirates restricted to a production of 3.2 million barrels per day, when the country has invested aggressively to reach a real capacity close to 5 million. The Emirates “have been eager to pump more oil for some time,” notes David Oxley of Capital Economics in the same medium. The economic consequences are already being felt. The World Bank, which classifies this crisis as the largest supply loss on record, predicts a 25% increase in energy prices. Brent crude oil has experienced extreme volatility, fluctuating between $104 and $119 per barrel since the start of hostilities. Looking ahead, Jorge León, from Rystad Energy, explains in Guardian that Saudi Arabia will be left alone to shoulder the heavy burden of stabilizing the market, which predicts much greater volatility in the long term. The Arab fracture. Beyond barrels and dollars, the departure of the UAE is a direct symptom of a deep geopolitical fracture accelerated by the war. Emirates feels abandoned. The disappointment of the Gulf: As highlighted Al Jazeerathe decision comes shortly after harsh statements by Anwar Gargash, diplomatic advisor to the Emirati president. Gargash openly criticized the “historically weak” response of Arab countries and the Gulf Cooperation Council (GCC) to the Iranian attacks. According to Euronewsthe Emirates have had to absorb much of the impacts of missiles and drones, feeling that their OPEC allies have not provided them with political or military support. Direct tension with Riyadh: The departure has not been agreed with the de facto leader of the cartel. UAE Energy Minister Suhail Mohamed al-Mazrouei confirmed to Reuters who made this “political” decision without consulting Saudi Arabia. The relationship between both powers has been deteriorating for months due to economic competition and recent military disagreements, such as the collapse of their coalition in Yemen in December. An unexpected triumph in Washington. Curiously, this regional fracture represents a diplomatic victory for the American president. Donald Trump had been accusing OPEC of “scam the world” manipulating prices, while the United States paid for the military defense of the Gulf. The departure of the group’s third largest producer weakens exactly the structure that Trump had criticized so much. Towards a “new energy era”. Paradoxically, the flood of Emirati oil will not reach the markets tomorrow morning. As long as the Strait of Hormuz remains blocked by war, the impact on global supply will be limited in the short term because ships simply cannot leave. However, the message is sent. When the waters of the Persian Gulf calm, the world will find itself with a market flooded with Emirati crude oil, operating freely. The Emirates has decided to embrace a “new energy era”, the geopolitical map of the Middle East is being redrawn in the heat of the bombs, and OPEC, as we knew it, seems to be one of its first major collateral victims. Image | Emiel Molenaar Xataka | By blocking the Strait of Hormuz blockade, the US is dragging an unpredictable actor into the war: China