An attack — or even an attempted attack — by Islamic extremists on Saudi Arabia’s oil sector would have disastrous consequences on the world market and the price per barrel, analysts warn.
Of more than 700 people arrested in the course of the last six months in Saudi Arabia, dozens had been part of cells charged with preparing attacks against oil sites, according to authorities in Riyadh.
With the price per barrel rising constantly and the capacity to increase global production almost non-existent, apart from in Saudi Arabia, the world market has never been so vulnerable to an offensive by Jihadists in the kingdom, they said.
Michael Klare, head of the University of Massachusetts’s peace and world security programme and author of the book Resource Wars, said that even if an attack caused little damage, the impact would still be enormous.
“There would be a tremendous psychological effect because the market is already prepared to expect terrorist events like this. It would have an immediate effect on prices,” he said.
“And if an attack actually damaged production or exploration, the effect would be even greater. The rise would be astronomical,” he added.
Klare believes that a less significant attack would result in a price hike of no more than $10 a barrel.
“[But] if they managed to destroy a major refinery or a major loading facility and cut production, that would have a dramatic impact. Prices would go to $200 a barrel,” he said.
The Saudi oil sector, which spends considerable sums on security, has been an al-Qaeda target for years.
Osama bin Laden in December 2004 called on followers in an audio message to “aim your operations at oil production in Iraq and in the Gulf”.
In February 2006 assailants using two booby-trapped cars tried to enter the huge Abqaiq complex, the biggest in the world, in the east of the kingdom.
When challenged they detonated the explosives, killing themselves and two guards.
Francis Perrin, editor-in-chief of Arab Oil and Gas magazine, said the current price of oil revealed the concern over the fragility of world supplies and the danger that in future supply will no longer satisfy demand.
“In such a context, an attack against oil installations in Saudi Arabia would have a considerable impact,” he said, adding that Saudi Arabia played a unique role in the world market that was on a “knife-edge.”
“It is the country possessing a bit less than a quarter of the reserves, it is the leader at the heart of Opec [the Organisation of Petroleum Exporting Countries], the number one in terms of unused capacity … It’s the only country in the world of capable of producing more in the short term, in weeks,” he said.
If an attack was carried out against minor installations, the impact would be significant, he said. But if an attack succeeded against more important installations, “the effect would be absolutely incalculable in terms of price”.
Against this background Israeli threats of an air offensive against Iranian nuclear installations only add to the market’s nervousness, said Klare.
“If such an attack is conducted, I think the Iranians will try to engineer terrorist attacks in Saudi Arabia, Kuwait and Bahrain. They would do everything they can to create chaos in the international oil market … Prices would skyrocket,” he said. — AFP