‘UAE & Saudi Arabia see oil differently, renewables a must for secure supplies’: Energy expert on Opec exit

Following the United Arab Emirates' (UAE) exit from Opec, energy expert Mannat Jaspal has said that Emirati and Saudi leaders had completely different visions for oil trade.

While Saudis believed in moderately producing oil and selling at higher prices for as long as possible, UAE wanted to ramp up production to sell as much oil as possible before the dipping of the demand, said Jaspal, who heads the energy programme at Observer Research Foundation's Middle East division.

As for energy security in the midst of war-induced crisis, Jaspal said that two forces will act in parallel to support energy security: increased oil and gas exploration in geographies previously considered unviable and a rise in low-carbon investments aimed at enhancing energy independence.

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Firstpost's Madhur Sharma sat down with Jaspal to discuss UAE's exit from Opec and the energy crisis created by the American-Israeli war on Iran. Edited excerpts:

What is behind the UAE's exit from Opec? Is there substance in the argument that Opec favoured Saudi Arabia over UAE?

Saudi Arabia and the UAE have completely different approaches to oil. Saudis want to regulate supply and sell oil for as long as possible at higher prices because they are far more dependent on oil whereas the Emiratis want to sell as much oil as possible before demand dips — it has already started dipping China's electrification means a fall of 1 million barrel a day.

As the Gulf’s most diversified economy, the UAE relies on oil and gas for just 25 per cent of its revenues, and 75 per cent comes from sectors like trade and logistics, tourism, hospitality, aviation, real estate, finance, and technology. But the Saudis still largely rely on oil. Their fiscal breakeven oil price is around $90 per barrel, which is nearly double that of the UAE. That meant the UAE could sell more oil at lower prices but could not because of Saudi-run Opec’s quotas. Given its deep integration with the global economy, sustained global stability is critical for the UAE’s diversified economic model to thrive.

After years of hearing various things described as the ‘new oil’, the latest oil and gas supply disruptions have shaken global markets. Do you believe this disruption highlights the reality that oil currently has no alternative despite all the talk of a post‑oil world?

Global oil demand continues to exceed 105 million barrels per day, driven by sustained consumption across key sectors such as transportation, aviation, petrochemicals, and other hard-to-abate industries. Despite ongoing energy transition efforts, oil remains a critical feedstock within the global economy. While its applications and patterns of use may evolve over time, it is likely to retain a central role in supporting economic growth and industrial activity in the near to medium term.

As a follow‑up, what direction do you think countries may now take in the energy domain? Do you expect them to double down on oil, gas, and coal, or push harder towards renewables to insulate themselves from oil and gas shocks?

Following the energy crises triggered by Russian invasion of Ukraine, investments in clean energy and technologies increased in Europe, reflecting an effort to secure control over domestic energy infrastructure. Similar trends are likely to unfold again.

In the near future, to absorb the price shocks and protect local communities, the government may switch to domestic fossil reserves. At the same time, these same shocks have strengthened the case for renewables and electrification. Countries —particularly in Europe and parts of Asia— are accelerating investments in solar, wind, hydrogen, and grid infrastructure as a way to insulate their economies from fossil fuel price volatility and geopolitical disruptions. Renewables are increasingly viewed not just as a climate solution, but as a strategic asset for energy independence.

In the ongoing energy crisis, how are countries faring that diversified their energy mix compared to those that remain heavily reliant on fossil fuels?

Energy shocks disproportionately affect economies. Nearly 70 per cent of the crude oil shipped through this marvel of geology is destined for China, India, Japan, and South Korea.

East Asian countries are particularly vulnerable. While Japan (254 days) and South Korea (210 days) maintain significant oil reserves, LNG inventories are modest. South Korea and Thailand have already announced fuel price caps. While countries such as Indonesia can partially switch to coal, Vietnam and Singapore lack comparable domestic energy buffers.

Europe, though less dependent on Gulf LNG, is nevertheless witnessing high domestic gas prices —up by almost 45 per cent since the onset of the conflict largely due to spot market volatility. Approximately 30 per cent of Europe’s jet fuel supply originates in or transits through the Strait further complicating efforts to transition away from Russian energy.

India, the second largest energy consumer in Asia after China, faces a more complex challenge — the country imports 60 per cent LNG and 40 per cent crude oil from the Middle East and has limited petroleum reserves at its disposal. China, on the other hand appears to be prepared with roughly six months of oil stockpiles. The numbers are revealing: While China imports half of its crude oil and almost one-third of its LNG from the region, yet utilises 6.6 per cent of Hormuz oil for overall energy consumption. Most of these reserves are held in onshore and floating storage as contingency buffer. China’s broader energy transition also helps cushion the impact.

As one of world’s leading electrostate, renewables accounted for 80 per cent of China’s new electricity demand in 2024. More than half of new passenger vehicle sales in the country are now new-energy vehicles and electric cars are displacing over one million barrels per day of implied oil demand. If this crisis was to accelerate the energy transition agenda, China’s green manufacturing dominance will only amplify. For now, between petroleum reserves, domestic coal supplies and renewables, China’s short-term vulnerabilities appear manageable.

The only real winners will be those that draw lessons from the crisis and move quickly to build robust energy security frameworks — one that integrate securitisation, resilience, and transition planning to safeguard the present and insulate the future.

What do you think will determine the specific path different countries take? Asia depends heavily on the Gulf for oil and gas. What trajectories do you see for various Asian countries, including India, with regard to their energy security?

Much like the strategic reset that followed the oil shocks of the 1970s, the current conflict is likely to push governments and institutions to reconsider what energy security means and how it should be managed in the 21st century. Future planning will increasingly need to adopt a wider risk‑management approach, taking into account financial systems, supply chains, infrastructure protection, and geopolitical volatility.

And energy‑transition agenda must be treated as a core pillar of long‑term security. Investments in renewables with storage, nuclear power, and grid optimisation are all likely to accelerate.

While supporters of the 'Drill Baby Drill' approach continue to stress energy dominance through expanding fossil‑fuel production, leaders across the world —including in India, South Korea, and Europe— are calling for reduced reliance on fossil‑fuel imports alongside faster electrification, renewables deployment, and efficiency gains. Renewables are now cheaper than their fossil‑fuel counterparts and offer a safer, more sustainable, and quicker‑to‑market alternative.