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Thesis & Antithesis

A critical perspective on energy, international politics & current affairs

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Location: Washington, D.C.

greekdefaultwatch@gmail.com Natural gas consultant by day, blogger on the Greek economy by night. Trained as an economist and political scientist. I believe in common sense and in data, and my aim is to offer insight written in language that is clear and convincing.

05 March 2006

A near miss in Abqaiq?

Gal Luft, executive director of the Institute for the Analysis of Global Security (link), wrote an op-ed in today’s Washington Post on the attack against the Abqaiq oil facility in Saudi Arabia. He says: “Had the terrorists succeeded in penetrating the guarded facility and detonating their bombs inside, they might have turned the complex into an inferno, releasing toxic chemicals that could have killed and sickened thousands of locals and expatriates, including many Americans, who work and live nearby” (1).

Dr. Luft is both right and wrong. It is true that success would have caused more damage than failure, but it is not true that this was a “near miss.” According to Saudi security adviser Nawaf Obaid, the car which penetrated the outer perimeter of the facility but was still stopped a mile away from the closest facility. Not exactly a near miss.

In a way, the emotional effect of terrorism has caused our imagination of what terrorists can do to outpace the terrorists’ own capabilities. This is a guerilla battle which is not asymmetrical; the success of terrorism depends, in large part, on the indefensibility of a country. But in a war on oil facilities, big guns, expensive radar systems, fast vehicles, trained military personnel, etc. counts. And it seems that the militants are no match for the Saudi security forces yet.

Another important point is the reaction to the attacks. When the militants first brought terrorism to Saudi Arabia (in May 2003), they were condemned because people thought they had gone too far (2). In reaction to this attack, the religious leader of Saudi Arabia issued a religious decree (fatwa) condemning the attacks, making the point that the attackers were threatening the collective wealth of the nation and were also provoking instability in the country that could excuse foreign intervention. This is not exactly the rhetoric that the militants depend upon to win, especially in a county such as Saudi Arabia where everyone’s wealth depends on oil. (The fatwa was read to me in Arabic and I have not found an English translation or link).

Does this mean that we should not fear such attacks? No. In all probability some attacks will take place, though the result will probably be less apocalyptic than is usually assumed. The key is to have appropriate reactions to such attacks. The problem, as Dr. Luft himself acknowledges, is that there is little spare capacity in world markets. But this is changing. Reports by OPEC (link) and even the IEA (link) predict that the call on OPEC (how much OPEC needs to product to balance supply and demand) will most likely remain constant over 2006. This means that increase in world oil markets will be met by non-OPEC supply, and OPEC supply expansion will increase spare capacity (link).

These are, of course, projections. But they underline two important themes: as long as spare capacity is the problem, the solution lies in more spare capacity, not unreasonable calls to reduce dependence for oil. In part this is happening, though the data is not 100% reassuring. The other point is about China—its overseas activities are contributing to a growth in supply which will alleviate pressures on the world oil market and contribute to everyone’s security. America may not like what China is doing, but it cannot demonize the world oil market while, at the same time, condemning China which is aggressive in trying to correct it.

References:
(1) Gal Luft, “An Energy Pearl Harbor?” Washington Post, 5 Mar 06 (link); (2) Crisis Group, “Can Saudi Arabia Reform Itself?” Middle East Report No 28, 14 July 2004;

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