By Verangika Upananda
Based on recent official announcements and global developments, as of May 1, 2026, the United Arab Emirates (UAE) has formally withdrawn from the Organisation of the Petroleum Exporting Countries (OPEC) and the broader OPEC+ alliance. This marks a historic shift in global energy politics, bringing an end to the UAE’s membership that dates back to 1967. The UAE had been one of the key powers in OPEC in terms of oil production and decision-making. To understand the significance of this decision, it is important to look at the history of the international oil industry, the formation of OPEC, and the evolution of oil concession agreements. The history of OPEC goes back as far as the 1940s, when two oil ministers from Venezuela and Saudi Arabia grasped the importance of forming an association to counteract the unlimited powers of multinational oil corporations that dominated the oil industry at that time. These corporations were known as the “Seven Sisters”: Anglo-Iranian Oil Company, Gulf Oil, Royal Dutch Shell, Standard Oil of California, Standard Oil of New Jersey, Standard Oil of New York, and Texaco. Before OPEC was established, these multinational corporations controlled the bulk of oil exports from oil-producing countries. They aimed to prevent large amounts of crude oil from accumulating in the hands of sellers, which could lead to competition among them and push prices down. This system effectively limited the power of producing countries. As a result of these conditions, OPEC was formed in 1960 by Venezuela, Saudi Arabia, Iraq, Iran, and Kuwait. The main objective was “to coordinate and unify petroleum policies among member countries to secure fair and stable prices for petroleum producers.”
In the following decade, several other countries joined OPEC, including Qatar, Indonesia, Libya, the UAE, Algeria, Nigeria, Ecuador, and Gabon. However, the prominent power shift occurred only after 1972, particularly due to U.S. support of Israel during the Yom Kippur War. This period marked a decisive moment when OPEC demonstrated its influence over global oil markets. The popular discourse about OPEC today often emphasises its role in announcing production quotas and exercising market power. As a founding member, Saudi Arabia has more influence in decision-making within OPEC and continues to play a central role. However, since the 1980s, several countries have left OPEC, including Indonesia, Qatar, Ecuador, Angola, and now the UAE. The reasons for these withdrawals have generally included disagreements over production quotas, internal fiscal challenges, and strategic shifts towards enhancing national production capacity. This reflects a gradual weakening of collective discipline within OPEC, even as it continued to play a significant role in global oil markets.
In 2016, OPEC agreed with ten non-OPEC countries, including Russia, forming what is known as OPEC+. This was largely in response to major shifts in the global oil market. Such as American oil production had increased significantly, flooding the market and causing prices to fall from over $100 per barrel in 2014 to below $30 in early 2016, OPEC realised that even if its members reduced production, they no longer controlled enough of the world’s oil supply to influence prices effectively, and both Saudi Arabia and Russia were under economic pressure, with falling oil prices affecting foreign reserves and creating budget deficits. Today, total global oil production is about 40% within OPEC+ countries, including the UAE.
According to the international media, the UAE’s decision to exit OPEC was driven by several key factors. They are; the UAE has expanded its oil production capacity to nearly 5 million barrels per day, but OPEC quotas have limited its output to around 3.2 million. Leaving OPEC means allowing production freedom, allowing the country to fully utilise its capacity. UAE officials have stated that their national interests are increasingly linked to broader economic growth rather than just oil prices. Increased production can help finance sectors such as AI, renewable energy, and tourism, which means they are looking at more economic diversification. Further, certain media reported that this move reflects growing differences with Saudi Arabia over oil strategy and regional influence, as well as a shift towards stronger alignment with major oil-importing countries such as the United States and China. And also concerning energy security, the ongoing disruptions in the Strait of Hormuz due to regional conflict have increased the need for independent supply management.
The UAE’s exit is likely to have significant implications in the global energy market. As one of OPEC’s largest producers, the UAE’s departure reduces the organisation’s ability to control global oil prices and signals a potential rupture in Gulf unity as it weakens the cartel’s power. Removing production limits on a major producer may increase global supply, potentially lowering prices in the long term. And by leaving OPEC+, the UAE is also stepping away from coordination with non-OPEC producers, moving towards an independent energy policy.
Does it have an impact on Sri Lanka?
Sri Lanka is entirely dependent on imported oil, as the country does not produce fossil fuels domestically. According to the World Bank’s latest available data (2023), the United Arab Emirates is the largest supplier of fuel to Sri Lanka, followed by Singapore, Malaysia, Russia, Oman, India, and Saudi Arabia, although this ranking varies from year to year. In this context, the UAE’s exit from OPEC carries both opportunities and risks for Sri Lanka and the wider South Asian region. On the one hand, increased oil production by the UAE and a greater supply to global markets could contribute to lower global oil prices, thereby reducing foreign exchange outflows and helping to control domestic inflation. Moreover, an independent UAE may pursue bilateral energy agreements with countries in South Asia, potentially opening new and more stable energy partnerships. On the other hand, global uncertainties, particularly disruptions in key shipping routes, may still affect supply security, limiting the extent to which these potential benefits are realised.
The UAE’s exit from OPEC ultimately reflects a broader shift in the global energy landscape, from collective control towards greater national autonomy and market-driven strategies. While OPEC was originally formed to counter the dominance of multinational corporations and stabilise prices, its ability to maintain cohesion has been increasingly challenged by changing market dynamics, new producers, and diverging national interests. For countries such as Sri Lanka, this evolving order presents a mixed reality. In this context, Sri Lanka’s long-term challenge remains not only managing external dependence but also rethinking its energy strategy in a world where stability can no longer be assumed.
Verangika Upananda is a researcher specializing in resource politics and is interested in sustainable development topics. She holds dual Master’s degrees in Development Studies from the Universities of Colombo and the University of Bayreuth, Germany and a BA in Social Sciences from the Open University of Sri Lanka. Her research spans the Democratic Republic of Congo, India, and Sri Lanka, integrating field-based insights with policy analysis. Verangika has worked in development consultancy and has served as a Visiting Lecturer in Economics at the Open University of Sri Lanka. She is currently a Research Specialist for Factum.
Factum is an Asia-Pacific-focused think tank on International Relations, Tech Cooperation, and Strategic Communications accessible via www.factum.lk
The views expressed here are the author’s own and do not necessarily reflect the organizations.
