Qatar leaves OPEC. What does this mean?

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As of January 1, 2019, Qatar quit the world’s main oil-producing organisation, OPEC. OPEC (Organisation of the Petroleum Exporting Countries) is an organisation that was established in 1960 by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. Qatar joined them in 1961. The group was set up to provide fair and steady oil prices and a regular supply of petroleum to non-producing countries.

Why did Qatar leave the group?

Qatar’s energy minister, Saad Sherida al-Kaabi, said that they were leaving the organisation because Qatar wanted to focus its attention on natural gas production rather than petroleum as it is more important to their economy.

Is that the real reason?

It could be, but many observers feel that Qatar wanted to leave an organisation that was mostly controlled by Saudi Arabia.  Last year Qatar was angered when Saudi Arabia, Egypt, the United Arab Emirates (UAE) and Bahrain cut all ties with them, claiming that the country supposedly funded terrorist activity. Many feel that they were very unhappy with that decision and were looking to break away ever since.

Is leaving a good idea?

Well, Qatar thinks it is. They are the largest producers of natural gas in the world, but one of the smaller producers of oil. Natural gas is a cleaner, greener fuel than oil and they believe that it will be more important in the future. With Australia, USA and Russia all increasing production and beginning to catch up, they think that it is best that they concentrate on keeping  world- leader status in that market.

Credit: bloomberg.com

So what does it mean for OPEC?

Qatar leaving OPEC may not impact the organisation economically. Qatar produces only about 600,000 barrels of oil per day. In comparison, Saudi Arabia produces over 10 million barrels per day. So when Qatar left, there was no real effect felt on markets around the world.

Credit: bloomberg.com

However, it may matter in terms of how it looks to the rest of the world. Usually, OPEC countries have managed to work together on oil production issues even though there were feuds between them. For example, Iran and Iraq fought an eight-year-long war, but both remained in OPEC. So Qatar’s departure shows that it really does not see much point in staying and can do much better on its own.

Lastly, OPEC is also not as powerful in influencing world matters as it once was. Recently, both America and Russia pumped more oil than Saudi Arabia. More and more countries may become less dependent on OPEC countries for oil, and on oil in general as well, as they move towards more environmentally-friendly energy sources.


Written by: Pereena Lamba. Pereena is a freelance writer, editor and creative consultant . She is also co-author of Totally Mumbai.

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