You’ll be hearing a lot about OPEC today after the United Arab Emirates (UAE) announced it’s withdrawing from the group of major oil exporting countries.
OPEC was founded in 1960 to “coordinate and unify the petroleum policies of its member countries and ensure the stabilization of oil markets in order to secure an efficient, economic and regular supply of petroleum to consumers.”
To begin with, there were just five members: Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela. Since then, it has grown to 12, collectively supplying about 36.17% of the world’s crude oil production. OPEC members control about 79.22% of the world’s total proven crude reserves. The UAE joined in 1967.
OPEC+ is a larger group consisting of OPEC members and other oil-producing allies, including Russia.
So, what does OPEC do? OPEC member countries monitor the market and decide collectively to raise or lower oil production in order to maintain stable prices and supply. A unanimous vote is required on raising or lowering oil production.
Why does the UAE want to withdraw from OPEC? The UAE wants higher OPEC production quotas because it has the capacity to produce much more oil than it is currently allowed to produce. The UAE said it would leave the cartel, and be able to set its own production levels, from May 1.
Oil and energy ministers from OPEC member countries usually meet twice a year to determine OPEC’s output level. They also meet in extraordinary sessions whenever required.
The news did not lead to a significant change in the oil price, which has spiked since the start of the war in Iran. Many analysts expect the UAE’s decision to leave OPEC to lead to a reduction in prices because it will increase global supply.
US President Donald Trump has previously accused OPEC of keeping oil prices “artificially high” by restraining how much oil was being released onto the markets.