By Amit Kapoor and Meenakshi Ajith
When the United Arab Emirates announced on April 28 that it was leaving OPEC; markets lurched and analysts called it “historic” and “seismic.” Some said it signals the “the beginning of the end of OPEC.” The harder question, though, isn’t what to call it. It’s what comes after, and who absorbs the cost.
The exit is a culmination of a long running fracture that has been widening for decades. When OPEC was founded in Baghdad in 1960, it controlled over half of globally traded crude. It was 52.5 percent as of 1973, the year its members brought the Western world to its knees with an embargo that more than doubled oil prices within months. That was OPEC at the height of its power: a cartel that could, and did, move the entire global economy by turning a single dial. As of 2025, that share stands at 36.7 percent. The UAE was OPEC’s third-largest producer, pumping around 3.4 million barrels per day against a production capacity of 4.85 million a gap that had been a source of friction for years. With it gone, that share shrinks further. As Charles-Henry Monchau, CIO of Swiss private bank Syz Group, put it: “OPEC will continue, but with materially less ability to set prices”.
The reason for this erosion isn’t primarily the UAE’s departure. The US has been the world’s largest oil producer since 2018, pumping 13.6 million barrels a day last year, more than Saudi Arabia and Russia. When shale arrived, it changed the geometry of global oil permanently. Any price floor OPEC establishes effectively subsidises American shale to return. OPEC has spent a decade trying to manage this dynamic. The compliance problem was also real since Kazakhstan and the UAE itself had both exceeded agreed production levels. When the rules apply unevenly and the financial cost of following them runs into billions, the exit door eventually looks rational. Then came the immediate context: fellow OPEC member Iran attacking UAE infrastructure, closing the Strait of Hormuz. OPEC+’s first post-UAE decision raising production by 188,000 barrels per day from June is largely symbolic while movement is constrained. More telling is where pricing power has actually migrated. With Gulf producers unable to export what they produce, influence over oil prices has shifted to the United States which is now the world’s largest producer, now effectively setting the marginal price. This is the logical endpoint of a decade-long trend: OPEC moving from price-setter to price-taker in a market it once owned.
However, OPEC, for all its imperfections, performed one function that markets do not naturally provide: it maintained spare capacity as a buffer against supply shocks. The current crisis has made that function visible by its absence. Global spare crude production capacity has effectively collapsed with most of it physically trapped in the Gulf and inaccessible. North Sea Dated crude is trading around $130 per barrel, $60 above pre-conflict levels. The IEA has been forced to release 400 million barrels of emergency reserves, the largest coordinated stock release in its history, simply to prevent markets from seizing entirely.
Shale responds to price signals, not geopolitical shocks. A more fragmented oil market, which is the logical destination of OPEC’s continued weakening is not automatically a more stable one. It could be one of sharper cycles, deeper crashes, and more violent spikes. OPEC survived the Iran-Iraq war, Venezuela’s collapse, and countless internal ruptures. The departure of UAE doesn’t just reduce OPEC’s headcount, but it removes the stabilising logic of the organisation.
The question now is who all will absorb the volatility. Rich countries have strategic petroleum reserves, diversified energy mixes, and fiscal capacity to ride out supply shocks. The US, which now sets the marginal oil price, is also the world’s largest producer. For them, a more volatile, less coordinated oil market is manageable and, in some readings, even beneficial.
For the 2.3 billion people worldwide, who still lack access to clean cooking, especially in sub-Saharan Africa and South Asia, the calculation is different. When LPG prices spike, the alternative isn’t just a portfolio adjustment but a return to unconventional methods which has its own downsides. India, which imports 85-88 percent of its crude, has every reason to welcome a UAE unconstrained by production quotas; more supply, more competition, lower prices over time. However, that same India is also the country most exposed when coordination breaks down and prices don’t fall gradually, they spike violently.
Institutions built on collective interest are rarely tidy and the OPEC was no exception. The more important question, as the organisation loses its grip on a market it once shaped, is not what it was doing wrong. It is what happens to the function it performed, however imperfectly, in a world where no one else is performing it.
Sheikh Yamani, Saudi Arabia’s long-serving oil minister, once told his fellow OPEC members that the Stone Age did not end for lack of stone and that the Oil Age would end long before the world runs out of oil. While he was right about the direction, the question was never whether the transition would happen. It was always about how well the world would manage it. A more fragmented energy market is not inevitably a more dangerous one, but it will require new thinking about coordination, stability, and who bears the cost of getting it wrong. The institutions that replace OPEC’s stabilising function may look very different from OPEC itself. They may be bilateral agreements, regional frameworks, or mechanisms we have not yet imagined. However, the function itself of maintaining some buffer between geopolitical shock and economic collapse is not one the world can afford to abandon. The energy transition will be judged not just by how clean it is, but by how stable.
The article was published with Financial Express on May 8, 2026.
