One Missile Could Make the Oil Crisis Much Worse |
More than three weeks into the Iran War, President Trump has failed to accomplish any of the constantly changing objectives he has laid out along the way. Iran, meanwhile, has shown that even when weakened, it is able to inflict major damage on the world economy. It has all but closed off shipping in the vital Strait of Hormuz, through which about 20 percent of the world’s oil supply flows, as well as a major portion of liquefied natural gas (LNG). And though Iran’s ballistic missile capacity has been severely damaged, the country has been able to wreak havoc on oil and gas facilities in Iraq, Bahrain, Saudi Arabia, and other countries in the region nonetheless, oftentimes using cheap drones. Last week, it hit an LNG hub in Qatar where a significant percentage of the country’s gas is produced, and which will now require years of repair.
In the face of this chaos, the price of oil has spiked to well over $100 a barrel per the Brent crude international benchmark, well up from around $70 before the war, as fuel shortages start to bite around the world. But energy-industry expert Ellen Wald says that as chaotic as things are, it wouldn’t take much to go from bad to worse. I spoke with Wald, who runs Transversal Consulting and is a Senior Fellow at the Atlantic Council’s Global Energy Center, about how that might happen, and whether there’s still hope that this crisis won’t spiral fully out of control.
You wrote a book about Saudi oil. Officials there recently forecast that prices could go past $180 a barrel if the war keeps going until late April. Is that price realistic? And what’s your sense of the worst-case scenarios if this persists several more weeks? It’s important to recognize that Saudi officials are modeling various scenarios and what they could expect oil prices to be. And everyone’s doing this: JP Morgan does it, the Energy Information Administration does it. They’re looking at a variety of different things and we don’t have insight into their models, how they weigh various things. What’s significant about this is that they came up with a number that’s so high, a number that jumps off the page.
In terms of how bad this can get: prior to last week, we hadn’t seen any real direct hits to oil facilities in the Middle East. Then we started to see targeting. Israel and the U.S. targeted a big oil and gas field in Iran, and then we saw Iran target the LNG production area in Qatar, and an oil port in the UAE. We’ve seen them send missiles or drones to Shaybah Oil Field, which is a big facility in the Empty Quarter in Saudi Arabia. And they also send ballistic missiles to the port of Yanbu, which is where Saudi Arabia is exporting all of its oil. That’s all the way on the other side of Saudi Arabia, on the Red Sea. But so far there hasn’t been a major hit.
I don’t know if you remember those scenes........