In a landmark decision, Qatar has announced its withdrawal from the Organization of Petroleum Exporting Countries (OPEC) with effect from January 2019. The primary goal for this move is to shift focus towards the production of Liquefied Natural Gas, which isn’t part of OPEC’s directive. But what impact could this have on the oil market, given that Qatar only contributes less than 2% of the total oil output?
The Saudi-Qatar Conflict
One of the key subtleties in this development is the role of Saudi Arabia. The nation has led a regional blockade against Qatar because of allegations around supporting terrorism. Trade and travel links have been severed as part of this blockade which commenced in June 2017. Other OPEC members, including the United Arab Emirates, and Arab states like Bahrain and Egypt, have supported this economic boycott and political confrontation.
From Qatar’s perspective, this move by Saudi Arabia is a direct assault on its sovereignty. Consequently, other powerhouses among global oil producers, such as Russia, China, and the United States, who are not members of OPEC, are able to pursue their agendas independently.
Impact Analysis
Despite its decision to withdraw from OPEC, Qatar will not curtail its oil production. In fact, it seeks to enter into contracts with countries like Brazil, which is at the helm of oil production in Latin America. This may suggest that smaller oil producers are not satisfied with the control that Saudi Arabia and Russia exert over OPEC. A group of these smaller producers leaving the cartel could potentially dilute OPEC’s sway over the oil market.
The Organization of the Petroleum Exporting Countries (OPEC), established in the Baghdad Conference in 1960 by Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela holds a significant position in the global oil industry. It operates as a cartel with the primary objective of regulating oil supply to stabilize global oil prices, aiming to avert fluctuations that could impact both the producer and consumer nations’ economies.
Timeline of Countries Joining OPEC
| Country | Year Joined |
|---|---|
| Qatar | 1961 |
| Indonesia | 1962 |
| Libya | 1962 |
| United Arab Emirates | 1967 |
| Algeria | 1969 |
About OPEC
According to OPEC’s statutes, membership is open to any nation that is a significant exporter of oil and shares the organization’s ideals. Over time, several nations joined the founding five including Qatar (1961), Indonesia (1962), Libya (1962), the United Arab Emirates (1967), Algeria (1969), Nigeria (1971), Ecuador (1973), Gabon (1975), Angola (2007), Equatorial Guinea (2017), and Congo (2018).
However, some members have had a discordant relationship with the organization. For instance, Ecuador suspended its membership in 1992 but rejoined in October 2007. Similarly, Indonesia suspended its membership twice, once in 2009 and again in 2016. Gabon also terminated its membership in 1995 but came back to the Organization in July 2016.
OPEC’s headquarters are located in Vienna, Austria. While its function remains critical to global oil market stabilization, events like Qatar’s exit may alter the dynamics of the organization.