Opinion | Why the UAE quit Opec

Eat your hearts out, Pablo Escobar, Joaquín “El Chapo” Guzmán and Nemesio “El Mencho” Oseguera Cervantes. The richest cartel by far is still the Organisation of Petroleum Exporting Countries (Opec), and its leaders also get to die in bed. But one of its oldest members, the United Arab Emirates (UAE), has just quit.

No notice, no explanations, just quit. The UAE is the cartel’s third-biggest producer, so this is going to have several major consequences. The first, which will happen as soon as the Strait of Hormuz is reopened, is that the price of oil will drop, possibly even below the pre-war price.

(Brent oil was selling for about $65 a barrel one year ago. The whole purpose of a cartel is to keep the price of the product high by restricting the supply. That requires discipline by the producers, because some producers will benefit more than others if they succeed in keeping the prices high.

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(The oil is sold to everyone at the same price, but the cost of producing a barrel of oil varies widely among Opec members.) So there has always been a process of negotiating production quotas inside Opec, and the UAE usually wanted a higher quota than the cartel’s biggest producer and de facto leader, Saudi Arabia. It wasn’t just greed, though. The two countries have a profound disagreement about when the remaining oil will become unsaleable: a “stranded asset”.

All the CEOs and CFOs in the big oil companies know that fossil fuels will eventually have to be abandoned because of their catastrophic effect on global warming. They have known it since the 1960s because their own scientists told them so. They are not true denialists, who actually believe what they are saying.

They are just liars. Their strategy for 50 years has been to keep the show on the road at least until they have had time to make their pile and retire. At least 10 generations of senior oil execs have made their piles since then.

They spread doubt and confusion, bribed and smeared, and probably slowed the process of ending fossil fuel use by several decades. But all good things must end.

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