Saudi Arabia Warns of ‘Unimaginably High’ Oil Prices
Saudi Arabia has warned that in the event of no action been taken against Iran, there will be a disruption of energy supplies with oil prices jumping to “unimaginably high numbers.”
The Kingdom’s Crown Prince Mohammad bin Salman, in an interview to CBS television channel, said “If the world does not take strong and firm action to deter Iran, we will see further escalations that will threaten world interests. Oil supplies will be disrupted and oil prices will jump to unimaginably high numbers that we haven’t seen in our lifetimes.”
Automobile fuel prices in India have been rising. With India being the world’s third-largest oil importer, a record gain in crude oil prices could also aggravate India’s fiscal situation and make it tougher for the government and the central bank to effectively combat a slowdown in economic growth. India is particularly vulnerable as it imports more than 80% of its oil requirements and around 48% of natural gas.
The statement comes as tensions escalate in the Persian Gulf in the backdrop of 14 September drone attacks on Saudi Arabian Oil Company or Saudi Aramco’s facilities that caused the biggest ever-disruption in global crude oil supplies.
The unfolding events in West Asia have raised the specter of a spike in transportation fuel prices in India, with traders worldwide speculating if oil prices will cross the $100-mark yet again.
While strikes at Abqaiq and Khurais oil facilities disrupted more than half of Saudi Arabia’s oil capacity or 5.7 million barrels per day (mbpd) or around 5% of the global oil supply; the enormity of the situation can be gauged from the fact that it was termed as the far worst shock to global supplies than when Saddam Hussein invaded Kuwait in 1990 and 1979 Islamic Revolution in Iran.
Tensions have escalated in the region due to events such as an alleged attack by Iran on oil tankers in international waterways, with a fifth of global oil supplies passing through the strategic Strait of Hormuz. US has also alleged that Iran shot down an American UAV and was behind the drone attacks on Saudi Aramco.
There has also been an escalation in hostilities with the Donald Trump administration restricting entry “for senior Iranian government officials and members of their families” into the US and also imposing sanctions on Chinese firms and individuals for transporting Iranian oil. Also, global shipping transportation prices have increased substantially post Trump administration’s plans to deploy an additional Patriot missile battery, sentinel RADARS and additional personnel to Saudi Arabia.
The cost of the Indian basket of crude, which averaged $47.56 and $56.43 a barrel in FY17 and FY18, respectively, was at $59.35 in August, according to data from the Petroleum Planning and Analysis Cell. The average price jumped to $63.61 a barrel on 24 September. The Indian basket of crude represents the average of Oman, Dubai and Brent Crude.