Look at how stupid we all are, falling for the olde war in the Middle East gambit. Meanwhile, we have limitless supply of crude at home and in our attic, aka Canada.
Nevertheless, this is the narrative that will now be trotted out. You should expect to see sharply higher crude prices for a sustained period of time.
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Yet Saturday’s attack could be more significant than that. Technology from drones to cyberattacks are available to groups like the Houthis, possibly with support from Saudi Arabia’s regional rival Iran. That major energy producer, facing sanctions but still shipping some oil, has both a political and financial incentive to weaken Saudi Arabia. The fact that the actions ostensibly were taken by a nonstate actor, though, limits the response that the U.S. or Saudi Arabia can take. Attempting to further punish Iran is a double-edged sword, given that pinching its main source of revenue, also oil, would further inflame prices.
While the redundancies in Saudi oil infrastructure mean that output may be restored as soon as Monday, the attack could build in a premium to oil prices that has long been absent due to complacency. Indeed, traders may now need to factor in new risks that threaten to take not hundreds of thousands but millions of barrels off the market at a time. U.S. shale production may have upended the world energy market with nimble output, but the market’s reaction time is several months, not days or weeks, and nowhere near enough to replace several million barrels.