On Saturday, oil production facilities in Saudi Arabia were bombed using drones, cutting the kingdom’s oil production in half. Houthi rebels, who are battling Saudi from Yemen, claimed responsibility, but U.S. officials believe Iran was behind the attack. Satellite photos show at least 19 points of impact at two Saudi facilities, including at a crucial oil refinery. It also shows the attacks came from the direction of Iran or Iraq, not from Yemen. The attack went largely unnoticed, but rest assured, Americans will become aware of it’s consequence in the coming days.
First, consumers of oil related products will immediately see increases. Crude oil futures shot up +9.5% to $60 per barrel just on the news of the attack. Some speculate oil could reach $100 a barrel. Saudi Arabia has promised to dip into their reserves until the damage is repaired, but clearly the price of petroleum based products will rise. The price at the pump is the most obvious place, but many consumer products are packaged in PET, made from petroleum. Those products will go up.
Second, expect more drone attacks. Technology can be used for good and bad. Drone aircraft have amazing applications in business, personal security and recreation, but they can also be used for evil. With drones being inexpensive and accessible, even the most budget conscious terrorist can and will wreak havoc.
Third, the bombing escalates the tensions in the region and could draw the U.S. into a war with Iran. Sen. Lindsay Graham, (R-SC), tweeted: “It is now time for the U.S. to put on the table an attack on Iranian oil refineries if they continue their provocation or increase nuclear enrichment.” Iranian General Amir Haijizadeh, in an attempt to defuse the situation, said, “Because of the tension and sensitive situation, our region is like a powder keg. When these contacts come too close, when forces come into contact with one another, it is possible a conflict happens because of a misunderstanding.” President Trump tweeted that America was ‘locked and loaded,” which would indicate there will be some retaliation against Iran. Some have described this drone attack as an economic “Pearl Harbor.”
There has been speculation President Trump would meet with Iranian President Hassan Rouhani during his upcoming trip to New York City for the U.N. General Assembly meeting to discuss the US imposed economic sanctions. On Sunday night, the POTUS tweeted that he would not meet with Rouhani unless he agreed there were ‘no conditions” for removal of the sanctions. It is unlikely that meeting will take place after the attacks.
Who knows how long this shortage of oil will last. In Oklahoma when the price of oil goes up, our state’s economy normally does well. Oklahoma government gets funded more because oil production (and the related taxes) goes up. Unemployment goes down because the oil patch is looking for workers. The big negative is the higher prices paid for petroleum related products- and of course our unstable world.