UAE Leaves OPEC and OPEC+

186

TTechTechTech about 3 hours ago 63 commentsRead Article on reuters.com

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bluGill•about 1 hour ago

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)

sarjann•2 minutes ago

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).

watwut•14 minutes ago

Saudi are staying and UAE is leaving because they want to pump more.

api•14 minutes ago

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.

jagraff•5 minutes ago

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

asah•15 minutes ago

-1: modern oil is operating at a scale where cheating is easy to catch. You'd need MMs per day barrels to move the needle.

https://chatgpt.com/share/69f0d6a3-3f2c-83e8-a944-094d84e155...

cmiles8•about 1 hour ago

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.

kybb4•33 minutes ago

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.

melling•about 1 hour ago

Cheap and plentiful fossil fuels.

We’re rolling back CAFE standards too.

nradov•about 1 hour ago

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.

post-it•18 minutes ago

This is, respectfully, corporate propaganda. Consumers buy the vehicles that are available and advertised. It's in the best interest of manufacturers to convince/compel consumers to buy larger, more expensive vehicles with higher margins, and that's exactly what they're doing.

a_random_name•18 minutes ago

Yeah, but "increasing taxes" always rouses the rabble.

the_sleaze_•15 minutes ago

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.

ch4s3•about 1 hour ago

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.

tootie•41 minutes ago

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.

glitchc•18 minutes ago

It's the other way around: Renewables will remain a fantasy until we achieve energy independence.

blackcatsec•7 minutes ago

When it comes to fossil fuels, there's no such thing as 'energy independence' because fossil fuels are traded on a global market. In addition, not all oil is the same. So you have to trade it because what you can extract may not be what is useful to you, but useful to someone else.

In short, the US cannot functionally be independent on fossil fuels even if we extracted every drop of oil within our borders--because we literally cannot use all of it, and most of it would be wasted just sitting around.

tootie•10 minutes ago

That makes no sense at all. We just had a post about several countries with energy independence who had done it with zero extractable resources. For them, the magic key was having tons of hydro and a small population. They just stopped importing. Countries like the US will need a lot more power and a lot more diversity of generation but it can be done if there was enough will to do it.

nine_k•36 minutes ago

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.

tootie•13 minutes ago

How? Being a net exporter implies we make more than we use. Great. How do we force companies to not export until domestic demand is met? And how do we ensure that doesn't raise prices more than just running the system as-is?

iLemming•about 1 hour ago

"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.

RobRivera•about 1 hour ago

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

bluGill•about 1 hour ago

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)

nine_k•15 minutes ago

Petromonarchies invest a lot into alternative asset classes: semiconductor industry, logistics and shipping, power electric machines, biomedical development, etc. Renewables are in the list, too.

bawolff•33 minutes ago

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.

the_mitsuhiko•27 minutes ago

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.

bpt3•4 minutes ago

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.

post-it•16 minutes ago

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.

gnfargbl•about 1 hour ago

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.

nine_k•32 minutes ago

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".

iLemming•34 minutes ago

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.

Grimburger•26 minutes ago

Only a little bit of time in the ME but the Land Rover is likely considered higher status.

Camels are cool still.

oniony•19 minutes ago

And where is the Jaecoo?

netdur•about 2 hours ago

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

Havoc•about 2 hours ago

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

eightysixfour•about 1 hour ago

> 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...

Havoc•about 1 hour ago

Indeed it’s leverage but at same time they only need the swap because all is not well in petrodollar land.

nimbius•about 2 hours ago

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.

ericmay•about 1 hour ago

> the US petrodollar promise to protect UAE states from aggression in exchange for trade in USD could not be upheld

Well the war is still ongoing, and Iran's regime is already feeling the pain of the blockade [1]. Pricing oil in Yuan because, I guess, the US is somehow not protecting the UAE doesn't make sense because China won't be there to protect them either. The US can just say, well fine you can sell your oil in Yuan. But we'll just blockade the Straight and seize oil priced in Yuan or something. Who exactly does the UAE need protection from? Iran? China's ally?

I swear I read this same story over and over again. There's always just an accusation "thing happened, here's how the US is now in a state of being screwed" and there's just never any follow-up or perhaps imagination that the US could just do something too. Hypersonic missiles? US Navy is done for, no possible counter. Iran has drones? Boom. US is done for no way they can spend Patriot missile money on $30,000 Iranian drones. Nope, nothing anyone can do at all. Iran "closes the Straight", well the US can't do anything. Now they are "embarrassed" and "slammed".

> OPEC cartel membership didnt gain it access to Hormuz

What does this mean?

[1] https://www.wsj.com/world/middle-east/iran-is-flooded-with-s...

elictronic•about 1 hour ago

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.

MattDamonSpace•about 1 hour ago

“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

lotsofpulp•about 1 hour ago

>UAE announced this week they might start selling oil in yuan

I have read this headline dozens of times in the previous 30 years.

Havoc•about 1 hour ago

I don’t think the gulf is in same as always mode right now

Eisenstein•about 1 hour ago

That doesn't mean the warnings were frivolous. There was ultimately a change in course which averted it. How sure are you that will be the case this time?

Cyph0n•about 1 hour ago

Has the GCC been in an existential state of panic to the point where they’re seriously questioning their relationship with the US any time in the past 30 years?

thaumasiotes•about 2 hours ago

Russia-led? Russia isn't even part of OPEC.

MobiusHorizons•about 1 hour ago

I believe they are in opec+

willchis•about 1 hour ago

That's the ad-free version, it's an extra $12.99 a month.

austin-cheney•about 2 hours ago

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.

asah•19 minutes ago

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).

Ifkaluva•about 1 hour ago

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?

bhouston•about 1 hour ago

The US is bailing out the UAE for liquify issues and this is likely a quid pro quo in return??

nashashmi•about 1 hour ago

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.

dueltmp_yufsy•about 2 hours ago

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.

thaumasiotes•about 2 hours ago

> 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.

tamimio•about 1 hour ago

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.

ChrisArchitect•about 2 hours ago

Some more discussion: https://news.ycombinator.com/item?id=47933983

cogman10•about 2 hours ago

> 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.

letmevoteplease•about 2 hours ago

OPEC has no rules requiring its members to sell oil in US dollars. Iran and Venezuela are members of OPEC.

rayiner•about 1 hour ago

> 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.

bilbo0s•about 2 hours ago

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.

M3L0NM4N•about 1 hour ago

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.

thaumasiotes•about 2 hours ago

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.

techblueberry•about 1 hour ago

> 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.