$200-300 oil if unrest spreads to Saudi Arabia says Sheikh Yamani
Posted on 05 April 2011 with 4 comments from readers
Former Saudi oil minister from the 1970s, Sheikh Ahmed Zaki Yamani told Reuters that oil prices would explode to $200 to $300 a barrel if regional unrest spreads to Saudi Arabia.
‘If something happens in Saudi Arabia it will go to $200 to $300,’ he said. ‘I don’t expect this for the time being, but who would have expected Tunisia?’
The comment by the one-time controller of the world’s major oil supplier is bound to send a shiver up the spine of consumers now facing the highest petrol prices ever. But doubtless stock markets will ignore it as they have spiralling energy costs across the world.
US dependence
Asked whether the US was likely to succeed in cutting its dependence on Saudi oil, he noted: ‘From the 1950s, American presidents have been saying this.’ It has indeed been much easier said than done.
Oil from the kingdom is easy to extract and transport, and energy subsitutes can be expensive and problematic. Consider Japan’s nuclear program for example.
The mounting chaos in Yemen, the southern neighbor of Saudi Arabia is a cause for concern. Its president has been backed by the US and Saudi in combating Islamic extremists and if he goes that effort may end too.
It was therefore good today to feel the heat rising in Dubai today with the mercury hitting 36.5C. Much above 40C and nobody can protest for long outside.
That said there is considerable worry about how long destabilization will last across the region. Has it become a permanent state of affairs akin to Europe after the French Revolution or the chaos in the pre-Soviet Union?
Egyptian election
The outcome of the Egyptian election in June is eagerly awaited or feared as it could bring some sort of new stability or a further lurch into anarchy and disorder.
If unrest does continue to grow this winter and spread to Saudi Arabia then oil prices will indeed rise to amazing new highs and jeopardize the very fragile global economy. And this sort of uncertainty does have a habit of being self-fulfilling.
The irony of course would be that the country to benefit most from $200 to $300 oil would be Saudi Arabia, at least in terms of oil revenues so long as shipments were not interupted.
4 Comments posted by readers:
I sense that, in your article, the cause of the unrest in Saudi Arabia and Egypt is due to the popular uprising for individual freedom and, perhaps, democracy.
However, I’ve just listened to another viewpoint which suggests that the problem in these two Sunni countries is, in fact, the belligerent tension between Shia muslims and Sunni muslims. The idea is that Yemen to the south of Saudi Arabia and southern Iraq to the north of SA are some sort of jumping off points for Shias in this muslim struggle to dominate SA.
Since Iran can control, I understand, the Strait of Hormuz and is trying to win control of the straits up into the Red Sea, the Suez canal and the Mediterranean by conquering Yemen for the Shias, then Shias will not only control these two marine choke-points for world crude but also be threatening Saudi Arabia to the north and the south.
I suppose that the US and SA will fight to resist this but some of the SA oilfields could be shut down in this inter-Muslim fight. Even the threat of stopping the flow of oil on the high seas would raise the price of oil to $200 a barrel and more.
I appreciate that what you’ve said includes what I have written in the phrase “regional unrest”. However, the statement about the outcome of Egypt’s election in June gives the impression that this regional unrest is all down to the people going out to demonstrate for their individual freedom.
Maybe what is far more serious than popular uprising is the sheer scale of the Sunni-Shia belligerence. If so, it matters not what the result of the Egyptian election will be in June since the Iran-sponsored Shias are surrounding SA and are poised to stop oil flow through two straits of great importance to the distribution of oil worldwide.
Technically, I’m sure that deepsea oil drilling is the answer to the ME religious in-fighting, but will enough of this oil be available before Iran and its Shia allies close down most of the ME’s oil exports? If not, crude may well reach $300 dollars a barrel, as you suggest in your article.
But then there’ll be war over this ME oil as well, since the US won’t let the Shias cut off our oil from the ME without a fight. When there’s war, you don’t know what to predict!
A$..the likely outcome of real Saudi difficulty is war..period..& the US would reverse its policy of winning by losing..Yamani should know this..he is attempting to make permanent higher prices seem a bargain if real conflict is avoided..its called diplomacy
I can’t see how the stock markets around the world will be able to ignore $200-$300 a barrel oil? Already the fragile economic recovery in the US is in jeopardy with oil hitting $108 a barrel.
As to the dependence of the US on Saudi oil, the US Census Bureau reported that, in 2010, Saudi oil accounted for a mere 5.41% of US oil imports. It is not the dependence of the US on Saudi oil per se that is cause for concern but rather the vacuum that will be created in world markets in case of any disruption of oil exports from Saudi Arabia.
Finally, I’m not sure whether the rise in temperature will lower the possibility of protests, for it is well known that tempers tend to flare more often as the mercury rises.
‘IF’ is the operative word in your quote. I wonder who might have an interest in driving up the price of oil with talk of higher prices and political instability? Now if the S.A. citizens had to really work in order to to eat, then the government might have a problem. That is why the USA has food stamps, and the myriad of other social welfare programs, to keep the hard working masses docile as their income stays flat, while the top .5% get unimaginably wealthy by shipping factories to China, and selling bad debt to suckers worldwide. (Watch the brilliant ‘House of Cards’ & ‘Untold Wealth’ documentaries by David Faber on CNBC.) And when it all goes wrong, they get bailed out by the fork lift drivers, plumbers, teachers, and office workers. All the while trying to get $800,000,000,000 in income tax cuts for themselves over the next decade. Meanwhile GE pays ZERO$ tax. I wonder why the dollar continues to go down, and gold up?