'Take the money and run': Johns Hopkins economist Steve Hanke on why the UAE quit OPEC

Key Points:

• The UAE announced its decision to leave OPEC, citing a strategic and economic vision focused on increasing domestic energy production and gradually raising oil output beyond OPEC limits, without explicitly mentioning the Gulf conflict.
• Economic advisor Steve Hanke explained that the UAE’s move aligns with a model predicting optimal oil production rates based on expected future prices; with anticipated declines in real oil prices due to rising green energy, the UAE aims to maximize profits by accelerating production now.
• Since 2021, the UAE pushed for a higher OPEC production quota, straining relations with Saudi Arabia and reflecting concerns over green energy reducing fossil fuel demand, while also investing heavily in sustainable technologies.
• The situation deteriorated significantly after Iran launched drone and missile attacks on key UAE oil infrastructure, damaging major facilities and threatening the UAE’s ability to export oil, raising fears over future sales due to Iran’s control of the Strait of Hormuz.
• This security threat increased the UAE’s economic incentive to produce and sell oil immediately rather than preserving reserves for the future, prompting its unprecedented decision to exit OPEC after nearly six decades of membership.