UAE to leave OPEC

It's more complex than that.

Saudi Arabia has the East-West Pipeline [1] that takes ~7Mbpd (million barrels per day) of oil to Red Sea ports to avoid the Strait of Hormuz. They were already using it so there's not a lot of extra capacity they can get out. If we continue up the escalation ladder, the next big risk is that the Houthis close Bab al-Mandab, which is a not-quite-as-narrow but still vulnerable chokepoint to the Red Sea.

The UAE has the ADCOP (Abu Dhabi Cross Oil Pipeline) [2], which takes ~1.8Mbpd to the Gulf of Oman. This is beyond the Strait of Hormuz but not that far so technically is still vulnerable to drone attacks (in particular) from Iran if, again, we climb the escalation ladder.

The real issue is American security guarantees to GCC nations have been shown to be an illusion. Heck, the US can't protect their own bases in the region. Also, the US can't protect maritime traffic through the Strait. I mean this is in all seriousness: there is no military solution to this problem short of the use of nuclear weapons.

That means we are now in a situation where the US has to either split with Israel and offer Iran significantly better terms than they had before the war, likely including the lfiting of economic sanctions, or the US has to sit and watch the world plunge into recession and Asian countries in particular are going to burn. And who knows what a prolonged impasse will do to Europe, particularly come winter.

So far, the US seems to prefer letting the world burn rather thans plitting with Israel.

A protection racket ceases to be a protection racket if it no longer offers protection.

[1]: https://en.wikipedia.org/wiki/East%E2%80%93West_Crude_Oil_Pi...

[2]: https://en.wikipedia.org/wiki/Habshan%E2%80%93Fujairah_oil_p...

The UAE is over-collateralized. They can sustain such a conflict for a very long time.

davidf18 your post (and all your recent posts) is flagged dead.

UAE is the third largest producer in OPEC, and has options to avoid the straight, yet Their economy recently get shocked though by the war they wanted to avoid

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> Shouldn’t UAE be upset their entire economy has absolutely rammed by the war started by Israel?

It's pretty convoluted logic to blame Israel for Iran attacking the UAE.

> an explainer of how many different proxy forces are involved in Yemen

RealLifeLore has been doing a decent job covering it [1].

The broad summary is you have the Saudi-backed unity government, the Iranian-backed Houthis, who claim all of Yemen but practically want North Yemen, and the UAE-backed STC, who also claim all of Yemen but practically want South Yemen. Emiratis bring the Israelis to the party. The Iranians bring the Russians. The Saudis bring various international elements (I know less about them than the Houthis and STC).

[1] https://m.youtube.com/watch?v=IgD7zmJN3_A&pp=0gcJCVACo7VqN5t...

Best of luck! These proxy wars have existed since the days of Assyria. 3000 years and running.

Kind of depressing thought actually.

I think there are only 3. Houthis (iran), PLC (saudi), and STC (UAE).

I guess Al-Qaeda and Isis are also there.

In the Middle East everyone fights with everyone else and everyone is in covert or open alliance with everyone else. Simultaneously.

UAE is in a tough spot because while they have diversified from oil, the industries they have diversified into like tourism, air travel and banking, were relying on a halo of safety that turns out to not exist.

I think it's not so much that they don't have liquid assets they can sell.

The issue is those liquid assets are US Treasuries and US public market equities (mag7 etc.).

They don't really want to sell them, and they also know that the US really doesn't want them to sell them - the last thing Trump wants heading into the midterms is an S&P500 bear market and 10y treasuries heading back to 5+%.

So they ask for a swap line and they're negotiating from a position of strength, the US doesn't have much of a choice but to give them as much as they need and damn the consequences

This kind of cooperation is not unprecedented, for example they've collaborated in the occupation of Socotra.

Sometimes foreign aid is good, other times it's bad.

Virtually all Arabs hate Israel but Arab governments are more varied. The modern Egyptian state is oriented toward close partnership with the US, and a large part of that was peace with Israel post '73.

So yes, the UAE could align with both.

They're not buddies per se, but Egypt was the first ME country to normalize relations.

Egyptians and Israelis hate each other, not their governments. They're on friendly terms relatively speaking.

If Egypt were a democracy, its government would hate Israel. That's why the current dictator overthrew the last democracy and had its elected leader die in jail, and that same dictator is now supported heavily by US funding

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> ... bank rolled Pakistan's not party to ...

They bank rolled Pakistan's not party to the treaty? Sorry I can't parse this sentence.

Did you munge two sentences i.e. Saudi Arabia bankrolled Pakistan's nuclear weapons, and also Pakistan is not party to the treaty?

We all live in a yellow cake submarine..

Its a pakistani submarine, with exclusive saudi-royalty members on the bridge.

We should build a city that is a statistical bunker- basically a line, for the edge case of jihadist insurgents getting the forbidden eggs in the cake.

It’s well known that some OPEC members cheat nonetheless.

> Developing nations have the strongest incentive to cheat since they need those margins to catch up

This isn't really how it works, since greenhouse gas output is pretty much corellated to income level, and even that's an understatement, since people in rich countries buy stuff made in poor countries, and manufacturing causes emissions.

The real problem is carbon credits - rich countries can both pollute, and absolve themselves of moral responsibility by buying carbon credits - and said carbon credits are fungible, so countries' compete for the lowest selling price.

So what ends up happening is poor countries sell carbon credits by offering programs and promises, but can't/won't bear the cost, as that would mean they'd have to raise credit prices, and buyers would go elsewhere.

It's a system designed to encourage cheating while absolving moral responsibility.

> 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.

IMO economics always wins. You're never going to see an all-cooperate scenario.

You will see an all-compete scenario, so constantly reducing costs for alternatives is key but you also have to find a way to ensure that the producers can win economically too. This is the conundrum.

If solar panels get cheap enough to create high demand, then that demand has to carry through the process of manufacturing, installing and maintenance. Every time I read that solar has gotten even cheaper, I start calling for quotes to install them at my house and the prices are borderline obscene. Same for geothermal last time I needed to update my HVAC.

I want solar and geothermal to work but the economics are a challenge.

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

There are economic mechanisms for this (e.g. https://en.wikipedia.org/wiki/EU_Carbon_Border_Adjustment_Me...) but broadly, yes, it is difficult.

So little political will is needed at this point as the economics now favor renewables. Unfortunately most of the political will seems to be leaning towards protecting the more expensive fossil fuel sources of energy.

Renewables (particularly solar) already are cheaper [1].

It's political will not economics that keeps us addicted to fossil fuels. Nobody gets rich from solar panels. You build them. They produce power. Oil wells like any mine are huge wealth concentrators. That's the real problem.

If anything, a bunch of countries (particularly those who are net oil importers) are re-evaluting their energy dependence given that the compact that the US will guarantee maritime transport has essentially been broken.

[1]: https://www.iea.org/reports/projected-costs-of-generating-el...

Isn’t solar already cheaper?

They want to pump more than they can hide, so they're leaving.

Ah, didn't know this, thanks. Republicans always lie, this isn't surprising.

This is interesting and under-reported. But it doesn't mean that oil would've spiked a lot less without the OPEC cuts, and that's not the same as gasoline costs which depend on refineries too.

Simple game theory doesn't work in the real world. In the short term most OPEC+ members other than Saudi Arabia have very limited technical ability to significantly increase or decrease production. It's not like they have a big valve that they can open or close at will. For many oil wells, restricting flow would actually damage the geologic substrate. And drilling new wells (including all of the supporting infrastructure) can take years.

Tit for tat (start by cooperating, and for each subsequent choice do what your opponent did last turn) is the optimal for repeated 2-party prisoners' dilemma.

The real world is much more complex. OPEC is a multi-party game, for starters. For another thing, there are cascades of social/political problems that get in the way of optimal strategy at the level of nations. I.e. that only works if politicians are more interested in solving problems than controlling narratives or maintaining power. Unfortunately, an ineffective leader can be sustained by controlling the narrative, while an effective leader can be destroyed by lack of control over the narrative. And one of the best ways to control a narrative (especially if you aren't a very good leader to begin with) is to create so much chaos that it distracts from your shortcomings, and blame the chaos on enemies.

Not always. In a simple game yes, but sometimes the game is more complex and so it is to your advantage to play even when you know others will defect.

Then they all pump more every year

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.

Their whole investment castle is built on sand (pun intended) and when oil even remotely starts to fade out as a commodity, it will crumble instantly. Panic will ensue and corruption will be rampant in order to continue the lavish consumerism. Everything will be sold for pennies. The difficult thing is not to make money once, it's to keep them afterwards.

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)

The 3 generation cycle has proven to be true in the past but families are smarter today.

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.

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.

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.

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

Camels are cool still.

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".

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.

I've heard mechanics can send their kids to college servicing Land Rovers.

And where is the Jaecoo?

like off-road capable, albeit still luxurious?

Would say Land Rover is considered more expensive than Mercedes

Stop repeating this lame talking point like a robot. We export because the crude oil export ban was lifted in 2015. If we didn't then we would already have the refinement capacity now.

There are financializing vampires in charge and their only goal is to short term bleed the country dry. "Investors" are allergic to investing.

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.

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.

Venezuela produces heavy "sour" crude (this means high in sulfur). Many of the US refineries capable of handling sour crude have closed, partly because the sulfur content makes the refineries stink (and emit lots of pollution) and partly because they need more expensive piping to handle the corrosive materials (not just the crude, but HF acid that's used in the refining process).

The last refinery to be built in the US opened in the 1970s. Since then, refineries have closed. None of the owners of refineries will sell them because of SuperFund legislation. It is the same reason that when a gas station is sold, the fuel tanks are dug up and replaced. This way, there's no way to claim that the previous owner left hazardous material to be cleaned up. SuperFund laws say that every previous owner is liable for the cost of cleanup. It doesn't matter how long ago the property was sold.

2017 when Venezuela accepted RMB for oil and then USDT crypto. USDT is being used to skirt the US's control of the oil and bypassing the dollar.

The ships passing through the straight now are also paying Iran in RMB and crypto.

The petrodollar is the objective.

This isn't over any time soon

Eh if the U.S. gets into a forever war with Iran the same way we did with Iraq and Afghanistan and Vietnam (or like how Russia got into one with Afghanistan and Ukraine), the climate crisis is solved. Five years of the Straight of Hormuz being closed and everybody will be using EVs.

Legislation isn't going to work. Economics isn't going to work. War - which cuts off the flow of petroleum because nobody is willing to risk their life for oil - will work very quickly. Nothing quite like a shortage to spur innovation.

...and up to that point, first world countries should not be complaining about developing nations using coal. It's a lot more shock resistant than diesel and natural gas, which is especially important for those that are so much more sensitive to inflation. From what I've seen coal, solar (hydro too, but that's land-dependent) and micromobility are save harbors. Not much they can do about the fertilizer shortfalls though.

The US/China trade war is intensely relevant to the large scale deployment of renewables in the US.

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

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.

> 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...

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.

“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

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.

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

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

I believe they are in opec+

Besides, nobody actually follows the OPEC limitations.

> ~1.8Mbpd (million barrels per day)

Mbpd = thousand barrels per day, MMbpd = million barrels per day

> so is only a fraction of the UAE's total oil exports

Isn’t it 30-50%ish depending on how you count it? Calling it “a fraction” makes it sound much smaller in conventional English.

OPEC doesn’t enforce currency or monetary policy rules.

No expert but I always got the impression Oman was a neutral party. They help run the Hormuz with Iran but largely neutral in world politics.

It also looks fairly easy to mine/blockade outside of their territorial waters. You don’t need that many drones to make the whole area unusable for marine transport. The strait is the clearest choke point but I don’t know how much bypassing it would help UAE

Fujairah, on the other side of Hormuz is the fourth largest bunkering hub in the world. That’s not “little oil infrastructure”

They do, it's only like 1-2 million barrels a day in capacity right now.

Oman is the Switzerland of the Middle East.

You should visit Fujairah ! Huge facilities there.

https://en.wikipedia.org/wiki/Habshan%E2%80%93Fujairah_oil_p...

Oman benefits significantly more from the war in Iran than the UAE, but is the most favorable country towards Iran in the GCC. See the visual here: https://archive.is/Xt3gd

Saudi Arabia and the UAE have been urging the US to bomb Iran since 2015 for their own non-oil reasons. They see political Islamism as a strategic and domestic threat. That's why they had Qatar under a blockade for a number of years. Iran is their biggest rival, exporting militancy to Yemen - the Houthis who UAE and Saudi Arabia battled for a number of years last decade. A number of attacks on Saudi and UAE oil and gas facilities from Iran Quds-backed militant groups in Iraq across 2019-2022. None of this makes the news in the West.

They are a wannabe Israel, a bad faith actor sowing chaos for geopolitical advantage. They've been spending money on Washington lobbyists to advocate for this war for a long time. And this isn't the only skulduggery they've been up to. They've supported the warlord Haftar in Libya and the genocidal RSF militia in Sudan.

They've hired American mercenaries to assassinate Islamist civil society figures in Yemen. They pay European right-wing influencers to spread anti Muslim content (yes you read that right). They are the buyer for conflict gold coming from the Congo. In short they are a problem.

Does being a member of OPEC affect that at all?

That really does highlight how badly the US is a controlled petrostate, and how different that is to past events where the US goes around demanding that OPEC raise production.

OPEC doesn't adjust production. They set production targets, and then most of the members cheat. For geological reasons it's not even really possible to significantly reducing production on many oil wells without damaging them. Saudi Arabia generally has more freedom to throttle production up or down than other OPEC members.

You have another thing which is that MBS (correctly) felt comfortable ignoring Biden. If he'd slighted Trump in that way it would probably take 2 private jets to undo the damage.

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The cartel can't even self police. These are like climate pledges.

> since the 1980s [OPEC] largely failed to achieve its goals [...]

> members have cheated on 96% of their commitments.

> One large reason for the frequent cheating is that OPEC does not punish members

Financial Times: "There’s no such thing as the petrodollar"

https://www.ft.com/content/be345914-7b4b-4264-bcbd-6e5e33b79...

https://archive.is/4rn8t

I am personally convinced that there are many more people pretending to understand geopolitics than people who actually understand. It could be that no one truly understands due to the amount of fractal complexity and emergence.

seriously. instant indicator that their world view is irreversibly warped by tiktok politics.

It's not that the petrodollar is doomed, it's just 'devaluing'. The US isn't a stable, safe place for cash anymore. But the world still needs massive amounts of safe cash. So there really is only one alternative: diversify.

They'll diversity into Gold, rare-earth metals (they're only getting more important), CIPS, Yuan, Euro. That diversification helps everyone else, but will hurt the US, which hurts financial markets, and thus everyone else. And once they're all divested, the diversification will add risk and losses. Can't be helped though, they still need security. So we're looking at a generation of slow global decline, probably propped up slightly by the industrialization of AI (which of course China is leading the world in, as nobody cares about "better", they care about "cheaper"). China is the real winner, because all they need is oil, and their partners will make sure they get a steady supply (because it's in their partners' interests; that's what having allies is all about).

US can't stop this; their military isn't equipped to fight wars on multiple fronts, their lumbering, expensive weapons can't be sustained in a protracted conflict, their wars aren't popular at home, and they don't have the manpower. Even when they eventually start the draft back up it'll take years to build up their warfighting capabilities, and by then the world will have diversified enough that they can take the hit. (The US will try a World War anyway to try and retain the Empire, because their leaders are psychotic morons and their people are compliant, but they'll still lose. (Historic parallel: Sparta. Great military, but tiny, so most of their power came from wealth and tenant states; eventually the rest of the mediterranean got tired of their shit (installing dictatorships, alienating allies) and their empire died. Hell, even their Navy was paid for by Persia - foreign investment used to weaken rivals via proxy war))

I don't think this is avoidable. Nobody trusts the US now. The divestment has already begun. Countries aren't suddenly going to change their minds - even if Trump doesn't overthrow the government to cement this new status quo in 2028 (which he 100% will), the next President could be another Trump. Nobody wants to be subject to their insane policies (foreign & fiscal) anymore. So the US isn't a secure place for cash. Nations aren't just going to shrug and ignore it, they're going to act to protect their interests.

Wow, this is a great share. I am regular reader of FTAV. I highly recommend it to others here.

I like this part:

    > One big flaw in their argument is that the petrodollar isn’t nearly as big a factor in the global dollar ecosystem as it used to be

    > A proper grasp of the events in question suggests that the ballyhoo over the petrodollar’s alleged imperilment will prove to be just the latest in a series of false alarms about the dollar’s status atop the world’s currency hierarchy.

You say "people tend to get cause and effect confused" and then unironically follow that up with:

> What makes the dollar strong? The US military

The US military and the dollar are strong because the US economy is strong.

Ordinarily a Cartel is illegal. If say the US breakfast cereal manufacturers decided to all agree they'll charge a minimum $20 per kilogram, no bulk discounts, the government can and likely will (assuming they don't remember to bribe Donald Trump) prosecute them and force them to stop doing that.

If you've been involved in an SDO ("Standards Development Organisation" think ISO or the IETF although the IETF would insist that they are not in fact an "Organisation" they will admit to being in effect an SDO) you've probably at least glanced at documents explaining that you absolutely must not do anything which looks like Cartel activity, you can't use the SDO to agree prices, or to cut up territory or similar things. The SDO's lawyers will have insisted they make sure every participant knows about this because they don't want to end up in prison or worse.

However the trick for OPEC is that it's a cartel of sovereign entities. It can't be against the rules because its members are the ones who decide the rules. So Chevron and Shell and so on cannot be members of OPEC but the UAE and Venezuela can.

> Which to me sounds like a good thing for the rest of the world?

It probably isn't a bad thing, but let's not overestimate the beneficial effects. The reason oil prices are high right now isn't because of cartel fuckery, it's because of Trump and his war. And oil supply chains are in such chaos because of Trump's war that even if it ended tomorrow it would take markets multiple years to return to a pre-war state.

The bottom line is that oil prices are going to be elevated for years to come, and when oil prices are high, OPEC has nothing to do other than sit back and collect the profits. And thanks to the ongoing solar revolution, oil's days as the world's predominant geopolitical poker chip are numbered; by mid-century OPEC won't be relevant anyway.

That’s similar to unions in general, but of course workers unions was the first thing out of the hat.

> OPEC is a cartel of Arab oil-producing countries

"In 1949, Venezuela initiated the move towards the establishment of what would become OPEC, by inviting Iran, Iraq, Kuwait and Saudi Arabia" ...

> OPEC is a cartel of Arab oil-producing countries, including UAE.

Nigeria joined OPEC in 1971.

> its demise.

OPEC or UAE?

OPEC was never a very effective cartel in the first place. Many of the members routinely exceeded production targets. And for geological reasons it's not like most oil wells can even be throttled down.

The UAE is trying to expand its ability to ship oil through Fujairah, so this could potentially undermine both KSA/Iraq and Iran.

Didn’t we see reports that Saudi Arabia was supporting and pushing Israel and U.S. to attack Iran?

The various Arab tribes or kingdoms had a long and bloody history of fighting each other going back before Israel even existed.