Link to article: https://www.bloomberg.com/news/articles/2020-11-18/uae-escalates-opec-dispute-as-tensions-on-output-quotas-mount
There has been tension between UAE and Saudi Arabia after the United Arab Emirates (UAE) breached its OPEC quota. The daily quota had been lowered to 2.59 million barrels per day in response to a decrease in oil demand as a result of Covid-19. For perspective, 4 million barrels is the country’s daily production capability.
The UAE has reportedly questioned the benefits of being a member of OPEC. Sources say they have considered leaving, although there has been no official announcement. Officially leaving would need approval from Mohammed bin Zayed, Abu Dhabi’s crown prince
The UAE economy has been suffering from a recession brought on by the Covid-19 pandemic. UAE officials want to stimulate their economy by speeding up the process of raising quotas. Oil prices have recently somewhat recovered, offering evidence that it is possible to raise daily quotas. However, other OPEC members are not sure prices will hold strong, causing them to be tentative about raising quotas.
The UAE considering to leave OPEC could be a sign to other countries that OPEC is weakening. If this fear becomes widespread, it could undermine an already tumultuous oil market. That being said, such quarrels are common as renegotiations approach, and it is unclear whether this will affect OPEC much at all.
OPEC is an economic IGO that regulates the oil market. The UAE’s consideration of leaving highlights one of the most widespread problems of IGOs: in order to be involved, member countries might give up a certain level of autonomy. For countries to be satisfied with their membership, they must get more benefits out of the group than autonomy lost.
This is also an example of the collective goods problem. Because countries will always act in their own interests, it is difficult to create a group that will benefit all members regardless of how much each one contributes.
A realist would say that the UAE is acting in its own self interest because the world is a state of anarchy. Because realists believe that countries only act in their own interests, they would be unsurprised that the UAE is putting the oil market in jeopardy because they are unhappy with being a member of OPEC.