The Iran war has exposed a long-simmering feud within OPEC, and folks, I almost spilled my coffee reading this one. The cartel is facing a fight for its existence, and it’s getting juicy. With the Strait of Hormuz reopening, some OPEC nations are clamoring to ramp up oil production to make up for lost time and sales. That’s reigniting age-old feuds about production quotas, which already led the United Arab Emirates to leave the group in April. Bless their hearts, it’s like they’re trying to make the soap operas jealous.
Now, OPEC is confronted with a critical choice: keep the group together and send oil prices into the ground, or drive profit higher and risk dismantling the nearly 70-year-old cartel. I mean, it’s not like they haven’t been in tough spots before, but this one’s a doozy. The cartel has to navigate a rapidly changing market in an increasingly hostile region of the world, all while competing with the United States, which has become a potent competitor.
The ultimate decider will be Saudi Arabia, the largest OPEC member with the most control over the group. Unlike Iraq and Kuwait, the Saudis don’t need production to ramp up too much, since they were able to keep their oil business mostly afloat by bypassing the strait with pipelines. That allowed them to get their oil out via the Red Sea, which is not an option for Iraq and Kuwait. So, Saudi Arabia lacks the same incentive to start pumping oil like crazy, and they might just play it cool and wait for the others to make the first move.
The price equation is also a factor here. If OPEC turns the spigots to max, all that oil may have nowhere to go, since demand hasn’t recovered yet. Demand tumbled during the war as prices surged and fuel was in short supply, and it may never return to where it was before the war, particularly in China and Europe, which went on an electrification spree over the spring. That means OPEC production could surge, competing with around 90 million other barrels of oil that are starting to escape the strait, according to Kpler. And if no one is eager to buy any of it, oil prices could plunge.
In theory, there should be buyers, since global emergency and commercial petroleum stockpiles plunged, particularly in the United States and China, as the world’s oil supply fell by an astonishing 1.4 billion barrels since the war started in March. Those reserves will need to be refilled, but that’s probably more a 2027 story than a 2026 one. If OPEC production surges, it would be competing with all that oil, and oil prices could plunge. Next year, $60 oil is in play, and in 2028, oil could sink to $50 a barrel. That’d be good news for consumers, but bad news for some of the cartel’s largest producers.
So, who wins in all this? Well, OPEC has tremendous incentive to keep the gang together, working together to navigate a rapidly changing market and compete with the United States. But the cartel has beaten back opposition before, and it’s not like they’re going to let a little thing like a feud break them up. Iraq has outlined targets to raise production capacity multiple times before, without much success, but it adds to the sense that cohesion and constraint within OPEC is breaking down. The extraordinary strait lockdown could make this time different, and it could force Saudi Arabia’s hand. If that happens, the Saudis still have a way to have their cake and eat it, too: they could agree to raise production caps so high and produce so much oil that it forces oil prices into the $40 range – territory that only the wealthy Saudis could endure.
In conclusion, the OPEC feud is getting interesting, folks. With the cartel facing a fight for its existence, and oil prices potentially plunging, it’s a wild ride. The Saudis are playing it cool, but they might just surprise us all. As Vikas Dwivedi, global oil and gas strategist at Macquarie Group, said, “[Saudi Crown Prince] Mohammed bin Salman could say: ‘If you push me too far, maybe we’ll grow production, too.'” It’s a game of oil chess, and I’m grabbing some popcorn to watch it all unfold. After all, as the saying goes, “you can’t have your oil and drink it too” – or can you, Saudi Arabia? 🙃
Armchair patriot. Believes in the free market, cold beer, and that there’s always a guy named George behind every CNN segment.
Former remote-throwing champion turned #1 couch commentator on liberal panic in the media. Born in Texas (or so his mug says), he earned a degree in Fake Newsology & Beer Philosophy from YouTube University.
