The United Arab Emirates’ plan to ditch the oil producers’ group Opec and strike out alone is being viewed as a huge blow for the organisation, with one analyst describing it as “the beginning of the end of Opec”.
It comes at a time of significant volatility in the oil market, with the US-Israel war with Iran triggering the biggest loss of oil supply on record, according to the World Bank.
Here, in five charts, we explain how Opec influences oil prices and what the UAE’s
Opec – the Organisation of the Petroleum Exporting Countries – was formed in 1960 by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela to defend the interests of major oil exporters by coordinating production to ensure steady revenue for its members.
The number of members has fluctuated over the years. In addition to its five founders it includes Algeria, Equatorial Guinea, Gabon, Libya, Nigeria and the Republic of the Congo.
In 2016, when oil prices were particularly low, Opec joined forces with 10 other oil producers, including Russia, to create the wider Opec+ alliance.
Opec aims to influence the global price of oil by agreeing how much its oil members sell. When they agree to sell more it is in an attempt to help lower prices by making sure supply is plentiful, and when they reduce supply, their aim is to keep prices high when demand is lower.
A key example is in October 1973, Arab oil producers placed an embargo on a group of countries led by the US over their support for Israel during the Yom Kippur war. That policy came alongside a co-ordinated cut to oil production.
Oil prices more than doubled, there was fuel rationing, and the significant knock-on effects were compounded by a second oil shock in 1979 with the Iranian Revolution.
More recently, when the price of crude oil crashed due to a lack of buyers during the coronavirus pandemic, Opec+ slashed production to boost prices.
Its response to soaring oil prices after Russia’s full-scale invasion of Ukraine in early 2022 was more muted – it pledged to raise production slightly, before slashing it later that year.
In its first meeting since the UAE left Opec, Opec+ decided members would increase production by 188,000 barrels per day from June. Their statement, which made no mention of the UAE, said this was to “support oil market stability”.
departure could mean.