The small gas-rich state of Qatar announced a few days ago that it was leaving the Organization of Petroleum Exporting Countries (OPEC) next month. It was an important signal that the toxic politics of the Middle East had got the better of an oil producing cartel that had so far called the shots on both pricing and production. Qatar’s Energy Minister Saad Sherida Al-Kaabi, speaking at a news conference in Doha, did not give any reasons save asserting that the Arab nation would be focusing on producing liquefied natural gas (LNG).
Qatar is the largest producer of LNG. It is also true that Qatar’s exit from OPEC will not have any immediate impact given its oil production is just 2 per cent of OPEC’s total output. But the symbolism in Qatar’s departure is larger than life. Qatar was among the earliest of OPEC’s entrants after the cartel was formed in 1960.
The exit of the first Middle Eastern country might just speed up the slow decline of the oil group. Moreover, Qatar’s action is an obvious retaliation to the Saudi Arabia-led economic blockade since June 2017. Three of its Arab neighbours had recalled their citizens, expelled Qataris, banned overflights from the nation’s airports and called for the winding up of the powerful Qatar-backed Al Jazeera news network.
Qatar’s exit has also exposed serious cracks in OPEC and raised doubts whether the cartel can survive for long; or whether the oil-producing nations will be better off negotiating on their own, something they have been doing anyway on the side.
The cartel has, as it is, been on a decline. And the Donald Trump administration that has been railing against ‘oil cartelisation’ may be only too happy to see it to its grave. Iran too has now hit back threatening that if the US stops Iran’s oil exports, as Trump has announced, it will ensure no oil flows through the Gulf. Overall, we have to tighten our seat belts as a dangerous cocktail of oil and politics threatens to derail normal global trade.