It seems as if any little hiccup in the Middle East causes gas prices to shoot through the roof. The oil companies are certainly looking for ways to boost the price to draw in as much income as possible. But now, after an oil attack on Saudi Arabia, and promises of retaliation, this sudden acceleration of trouble in the region could dramatically increase gas prices.
It’s this sudden increase that could push the global economy one step closer a recession. Many nations around the world are already teetering on the edge, including recent indications from the United States. The U.S. is further from a recession than, let’s say, Germany whose economy has been dropping like a stone in recent years.
Yet, a growing trade war with China is have global economic effects felt across every sector. Gas prices have been fairly low lately, with the price per barrel at $54.82 last Friday. Now analysts are predicting prices in the upper $70s as a result of this attack. No one knows yet exactly who committed the attack, even though the United States places the blame firmly on Iran. Iran has denied the accusation.
“The events in Saudi Arabia have ratcheted up tensions in the Middle East to a new level raising concerns about supply security,” said Chris Midgley, global head of analytics for S&P Global Platts. “Price could move higher if Saudi production is confirmed to be curtailed for a more substantial period which is not our current assumption,” he
U.S. Could Tap into Reserves
Kellyanne Conway, advisor to President Trump, suggested that if oil prices do rise dramatically and a shortage takes place due to escalating tensions, the U.S. could make a move. Currently, the United States is the world’s #1 oil producer, and we still have what’s called a Strategic Petroleum Reserve. This reserve is only opened in the case of an emergency. By flooding the market, it could keep gas prices down, at least here.
It’s unknown if whether the U.S. reserves would be pumped into the global market. At the very least, expect the price of gas to jump in the next few days. If you haven’t filled up yet, do so now while the prices are low enough. Oil prices have been creeping down in recent weeks, so this news is unwelcome, especially when it’s unknown exactly what happened in Saudi Arabia on Saturday.
The plant that exploded, the Abqaiq plant in Saudi Arabia’s Khurais oil field, pumps out 5% of all the oil in the world each day. Now that it’s shut down, expect the impact to be immediate unless the reserves are opened right away.
