UAE’s OPEC exit & higher oil risks

Shivaji Sarkar

None, not even US analysers, expected that a “non-descript war” with a small country like Iran could change the global energy scenario, that America is keen on monopolising. The US plans a conflict decades before as it had envisioned the 1969 Camp David accord with Egypt in a 1951 US congressional study. In 2026, its battle for supremacy is deeply hurt by Iranian strategies and devastation of US assets in 13 Gulf countries.

Now, OPEC seems to be in crisis, if not collapsing. The United Arab Emirates has decided to leave from May 1 and the American dollar sale accord with Saudi Arabia ended in 2024. The Saudis have shown inclination for trading in the Chinese Yuan and had expressed its desire to be part of BRICS, though stalled for now. India is the BRICS pres ident for the current year. It means the US could lose in trillions of dollars of transactions and if its NATO allies reach a peace deal with Russia, not unexpected, the global power scenario may shift faster than imagined. For India, the UAEs’ decision to leave OPEC is not just a Gulf political story—it is about fuel prices, inflation, the rupee, and economic stability.

As also having higher petroleum reserves India imports nearly 85% of its crude oil needs. Any rise in global oil prices directly raises petrol, diesel, transport costs, fertiliser prices, and leads to food inflation. With Brent crude already crossing $110 per barrel due to the US-Israel war on Iran and disruption in the Strait of Hormuz, the UAE’s exit from OPEC adds another layer of uncertainty. At first glance, more oil from the UAE could help India by reducing prices. But in the short term, it may increase volatility because the move weakens OPEC’s ability to manage supply and prices.

For India, the real concern is not only oil availability but unstable and unpredictable pricing. OPEC was formed in 1960 by Saudi Arabia, Iran, Iraq, Kuwait, and Venezuela to protect oil-exporting countries by controlling production and keeping prices stable. The UAE joined in 1967. For decades, OPEC had enormous power over the global oil market. That power scenario is changing. At one time, OPEC controlled more than 50% of global oil output.

Today, its direct share has fallen to around 30% because of rising production from the US, Brazil, and other independent producers. To recover influence, OPEC joined with Russia and others in 2016 to create OPEC+, controlling nearly half of world oil production. The UAE produces around 3.4 million barrels of oil per day and can increase output to nearly 5 million barrels per day after investing almost $150 billion in expanding capacity. Abu Dhabi had long demanded a bigger production quota inside OPEC to match this capacity. Saudi Arabia resisted because it wanted tighter supply to keep oil prices high. The UAE wants to sell more oil while demand remains strong. Saudi Arabia prefers production discipline to defend prices.

This difference became sharper after the Iran war damaged Gulf energy infrastructure and exposed political differences between the two countries. Iranian strikes hit UAE facilities like the Ruwais refinery and Fujairah export terminal. The US is now OPEC’s biggest rival. Once dependent on Gulf oil, America now produces nearly 20% of global oil through its shale boom and now, control over Venezuela. Brazil and others are also expanding output. US President Donald Trump has repeatedly attacked OPEC, accusing it of keeping prices artificially high and harming consumers. He has demanded lower oil prices and even threatened tariffs and reduced military support for Gulf allies. Abu Dhabi has grown closer to the US and Israel in recent years. By leaving OPEC, it gets more freedom to align its oil policy with market demand and American strategic interests rather than Saudi priorities. If the UAE increases output beyond former OPEC limits, more supply could soften global prices. Since the UAE is a low-cost producer, it can profit even at lower prices. This could reduce India’s fuel costs and inflation pressure. Still, immediate relief should not be expected. War damage, shipping disruption, insurance costs, and tanker risks will keep markets nervous. The UAE cannot suddenly flood the world with cheap oil. OPEC is not collapsing, but its authority is weakening. Chinese role in Pakistan-US-Iran talks remains strong. India so far is a bystander amid more oil shocks.