It’s Probably NOTHING

WSJ;

Saturday’s attack on a critical Saudi oil facility will almost certainly rock the world energy market in the short term, but it also carries disturbing long-term implications.
 
Ever since the dual 1970s oil crises, energy security officials have fretted about a deliberate strike on one of the critical choke points of energy production and transport. Sea lanes such as the Strait of Hormuz usually feature in such speculation. The facility in question at Abqaiq is perhaps more critical and vulnerable. The Wall Street Journal reported that five million barrels a day of output, or some 5% of world supply, would be taken offline as a result.
 
To illustrate the importance of Abqaiq in the oil market’s consciousness, an unsuccessful terrorist attack in 2006 using explosive-laden vehicles sent oil prices more than $2.00 a barrel higher. Saudi Arabia is known to spend billions of dollars annually protecting ports, pipelines and processing facilities, and it is the only major oil producer to maintain some spare output. Yet the nature of the attack, which used drones launched by Iranian-supported Houthi fighters from neighboring Yemen, shows that protecting such facilities may be far more difficult today.
 
There are countries that even today see their output ebb and flow as a result of militant activity, most notably Nigeria and Libya. Others, such as Venezuela, are in chronic decline due to political turmoil. Such news affects the oil price at the margin but is hardly shocking.
 
Deliberate attacks by actual military forces have been far rarer, with the exception of the 1980s “Tanker War” involving Iraq, Iran and the vessels of other regional producers such as Kuwait. When Saddam Hussein’s Iraqi forces invaded Kuwait in 1990, removing its production from the market and putting Saudi Arabia’s massive crude output under threat, prices more than doubled over two months.
 
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 outage may not last long given redundancies in Saudi oil infrastructure, the attack may 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.
 
After the smoke clears and markets calm down, the technological sophistication and audacity of Saturday’s attack will linger over the energy market.

The things that happen when I’m busy working. More links at Drudge and photos here.

52 Replies to “It’s Probably NOTHING”

  1. It would be very unfortunate if this affected oil deliveries to Irving refinery in Atlantic Canada and also supplies to Quebec.
    I wouldn’t be able to sleep out of concern for eastern Canadians. \sarc

  2. I expect a retaliation from S.A. This has been escalating for some time now, but the cost to SA is far more than to the USA when it had a $150 million drone shot down, and President Trump was ready to respond to that, and only called it off at the last moment.

    Will this bring about starvation in Yemen, or a wider regional war? Don’t call me, I don’t care.

    Will Nova Scotia have oil shortages? Not this month, there are plenty of reserves already in place. A pipeline to the east would alleviate those concerns. Perhaps after Alberta separates and they need to access BC’s ports to import their crappy Chinese made goods, they’ll have a new understanding of this.

    1. Can anyone with even half a brain tell me why Canadians don’t want to use their own oil? Idiots, morons, fools or just plain stupid?

      1. Conflict-free oil? What fun is that?

        Stories about Hollywood actresses and their recovered memories of a 1987 “rape” on the lap of Harvey Weinstein just doesn’t drive traffic to Drudge anymore. No, the RED letter headlines need a flaming oil depot and ME tensions.

        And another salient reminder of just WHY we are so lucky SHE isn’t President, busily empowering the EPA to shut down fracking across America. Nope, that honor goes to PM Socksinpuss (y).

      2. “…Idiots, morons, fools or just plain stupid?”

        Yes. That diversity is our strength, you know.

      3. ” tell me why Canadians don’t want to use their own oil?”

        The Quebecois do not consider themselves Canadians and the oil they use may originate in Arab lands but it’s middled to them by a French company, TOTAL, whose blue chip stock is owned by many Liberal Party of Canada pols going way back.
        I’ve read that Jean Chretien’s daughter, France, is married to one of the top executives.

  3. Trump has no need to interfere here. He has nothing to gain.
    The Saudis can hit Kharg Island and the Iranians can destroy the rest of that refinery properly.
    They can blockade the Persian Gulf and they can sink each others tankers to their heart’s content.
    Let the Chinese and the eurotrash can sort it out.
    The eastern bastids can freeze.

    1. Agreed. North America does not need their oil.

      Let them fight it out amongst themselves, to be dealt with only when becoming a direct threat.

      But we have co-opted politicians in the hands, and pockets of, cronies who know western crude in eastern refineries is a threat to their statist hegemony.

      Unconventional politicians like Donald Trump scare the crap out of them because they don’t support their cushy statist quo.

        1. Yes they do, that’s your comeback? Maybe you didn’t notice adults are talking here. It’s clearly past your bedtime.

  4. I’m so glad the USA is getting more and more energy independent. Up here we’ll enjoy the fruits of conflict oil lobbyists

  5. Here’s the best part: The Eastern Canadian Liberal bastards will freeze in the dark when the Mideast oil fails to flow up the St Lawrence.

    Hostile? Me? Oh no, it’s much worse than “Hostile”.

  6. Attention everyone, put your buy orders in on your favourite Canadian oil company. Guaranteed instant return.

      1. If Trudeau loses a majority and the results are know the night of the election, put in another buy. Otherwise, sell out!

  7. Coming to our shores soon without a doubt. I mean drones can shutdown airports and now apparently terrorists can use armed drones to attack any target. Not a lot of countermeasures here. We may have to nuke mecca afterall.

  8. The two points coming out of this I find of the most interest are:
    1. How reliable are US air defense systems
    This is the latest of multiple drone attacks on numerous Saudi oil and military facilities over the last several months. Indeed, even Patriot missile systems have been on the receiving end of Houthi suicide drones. This latest attack would require drones flying roughly 1,200 km into the heart of Saudi infrastructure. These facilities were under the umbrella of Saudi air defenses and not that far from a major US base. The same would be true if they were ballistic missiles fired from remote locations within Iraq. Clearly alarm bells should be going off in relation to the reliability of US radar and Patriot systems. This is a marked difference from what we are seeing in regard to Russian capabilities illustrated by attacks on their airbase in Khmeimim, Syria. The first drone attack from the rebels in Idlib caused considerable damage but since then the Russian Pantsir system has been highly effective at preventing multiple drone assaults.
    and
    2. Who are the unseen hands narrating these actions?
    There have been multiple air assaults recently carried out on Iranian allies in and around Al Bukamal on the Syria/Iraq border. Israel has alluded it might be behind them but there is intrigue as to how much the US and the Saudis are actors in this. It is certainly quite the coincidence that the Houthi develop the means to conduct deep drone strikes right at the time the US imposes embargos on Iran. We might never know who is doing what but I ponder how much actions against Iran and her allies are countered by strikes on the inept Saudi ally of the US and Israel to illustrate the potential for real consequences should a fight be picked. These sophisticated drone strikes, the precision ballistic missile strikes on ISIS in the Euphrates river valley last year, the downing of the high altitude US drone earlier this summer and the clandestine attack on tankers in the UAE suggest Iranian military capabilities might be somewhat more daunting than the Western collective brain trust might give them credit for.

  9. This isn’t the big one.

    You want to read about the big one? Take a read of Revelation 18 (in the Bible).

    Read it in the Complete Jewish Bible. It is utterly jaw-dropping.

  10. Andy Thom, yes good questions. As to (1), well, who launched the attack(s), who were manning the missile defences? How much warning did the Americans give them. I am sure they were tracked on radar and must have been in flight for an hour or so.

    (2) We must assume Iran, but we don’t know that, although I am sure many people do know who launched them. If it was Iran, they must be getting desperate to raise the ante like this.

  11. There will be wars and rumors of wars…

    For once in the last seventy years, the United States is energy independent. We DO NOT need to go to war for Saudi Arabia and their Oil. Let the mighty European Armies and Navies take the lead in the Mideast.

    Tell Frau Merkel that she is responsible, and that if she and her feloow socialists short-changed their European militaries for the last decade, too freakin bad. Too bad these same European idiots screwed up Libya. All that Libyan oil would come in handy for Europe about now. China uses Mid East oil, let’s see them keep the straits of Hormuz open.

    The US should support its real allies, but we should let everyone else take the lead until we are out of Afghanistan and the other never ending “police actions” involving the Religion of Pieces.

  12. It is very serious. President Trump stated he would release reserves from the SPR. Saudi will lose 7M barrels a day of production, right now they are pumping 9M a day. It was a 2 part attack using drones and cruise missiles. Sources are saying production will be down for 6 Months. They are already talking 25 cents a gal increase at the pumps on some US sites. US Secretary of State is promising SA. Full support. Drones do not have the same signature that missiles do, so radar not very likely to see them at all. There is no launch signature with drones like missiles. Big game changer in the regime change game. Small countries can hit back hard as SA is finding out. SA looking at retaliation on Iran. So if 50% of SA production gone for 6 months, and SA hits Kharg Island which ships 98% of Iranian oil, expect a total collapse of global economy. It means China is pooched, Russia is already at full production, no one to take up slack. Which is why Trump will open up SPR to stabilize global prices but it only holds enough oil for one month of US consumption. The EU and China could be in world of hurt. Inflation will rise faster. Longer term oil prices will rise as traders price in the new instability. The ME land scape could change fast, chaos if SA and Iran take each other out.

    1. The SPR can pump 4 million barrels a day for over 5 months at its current fill level. It does not have to provide very much oil to satisfy US demand, as US net imports right now are less than 1 million barrels a day. If the current pace of US production keeps up, the SPR could replace all oil imported to the US for at least a year and a half.

  13. Little brown Eco-facists at it again, wonder how Greenpeace will respond.

    Anyway good news for First World oil stocks, whoohoo!

    1. It most certainly is.. IMO
      That forced reduction in Canada, Venezuela and now Saudi Arabia and likely Iran is about raising the price of oil.
      How else are the (BANKERS) ever going to get their money back?
      Truegrope just blew through 80 $billion$ bucks of borrowed money in under 4 years, with nothing tangible to show for it, his handlers goal is to bankrupt us into a Liberal version of CUBA.
      The (BANKERS) WILL let that happen, they WILL also allow our oil to get to market, just as our dollar tanks, guaranteeing Albertas wealth is used properly, not for the benefit of Canadians but to pay off the worlds (BANKERS).
      If Truegrope stiffs the (BANKERS), like Maduro tried, we become Venezuela North!

  14. Hmm … I wonder how easy it is to topple wind towers and splash paint all over solar panel arrays? Why didn’t the Houthi’s/Iran target SA’s new “green” energy infrastructure?

    Oh … because it’s is completely inconsequential to anything. Because the world … everything on the entire bloody planet … runs on oil. Make a note of it.

  15. Im guessing that SA will want to retaliate against whomever they blame for the attacks. If it gets to be a tit for tat skirmish directed at MENA oil infrastructure and shipping then oil prices will skyrocket.

    After decades of being able to be naive and ignorant about dependable oil supplies, Canada might have to confront the importance of energy security. Western Canada is swimming in oil supply while very little can be transported directly to eastern Canada. Most of the west to east pipelines go from Canada to the USA then back to Canada. At least two of those pipelines are being threatened by US states for environmental reasons. Line reversals have also limited pipeline capacity to eastern Canada.

    There might not be a major disruption of foreign oil to the eastern half of Canada but that region remains very vulnerable due to its reliance on foreign oil. Too bad they also burned all bridges of goodwill with Alberta and Saskatchewan – NEP, equalization exploitation, carbon taxes, pipeline obstruction, etc. The rest of Canada don’t give a rat’s ass about our economy or offer to lend a helping hand to ease the ‘have province’ burden during this long recession in Alberta. They actually increased their malicious interference. Why should PrairieWest feel any obligation to help anyone east of Manitoba?

    1. $2/litre gas in Queerbec and the Maritimes looks pretty good about now, and a real possibility.

      We will also pay more out here, just due to the world price of oil effect, but that supply shortage directly affects effete Liberals in the Far East. Then when those weeping easterners whine and snivel over the high prices, Albertans can tell them “We tried to help you, but you turned us away. Now it’s OUR turn!”

      Love it!

    1. In a perfect world you could just cut off Vancouver and Victoria regions but not the rest of BC. Vancouver and Victoria should be delighted to be given the opportunity to instantly lower their carbon emmissions by restricting consumption of petroleum. They keep saying that being fossil fuel free is their image of Eden. Alberta should help them begin that utopian journey. It’s the neighborly thing to do. Ditto for Alberta’s and Saskatchewan’s “friends and allies” east of Portage la Prairie.

      1. Most of didn’t vote for the idiots and traitors who keep us dependent on foreign oil and/or selling what we have dirt cheap.

        1. Actions speak louder than words Anti-Alberta and anti-Saskatchewan sentiment in Canada is obvious. The only thing they seem to like about us is the money. Other than Rex Murphy, how many central and eastern Canadian journalists and politicians have shown support or challenged Trudeau’s Liberals on behalf of PrairieWest’s oil industry in the last decade? Few, if any. Although if there’s a big oil supply disruption I expect to hear a lot about pulling together as a country.

          Alberta and Saskatchewan shouldn’t be fooled again. Get concessions from Ottawa in writing : an absolute provincial veto over federal taxes and regulations that harm our industries, a phase out of equalization payments to any of the six big provinces, the same deals as Quebec on opt outs and provincial control of federal programs, an energy corridor from east to west. It’s the only way to protect Alberta and Saskatchewan from the rest of Canada.

          Benign neglect was acceptable, malicious interference is not. The repetition of malicious interference by Quebec prime ministers must stop.

          1. Any signed agreements to that effect should also declare they are concrete, non-negotiable, and cannot be superseded by any SC decisions, in any way. It should also include rights to build pipelines without specious legal actions, to the BC coast, and the rescinding of the Tanker ban!
            Let those fckers squirm and hurt! Get what is needed for the energy industry to survive and thrive fir the long term.
            Scheer might just have his wedge issue in this campaign, telling Canadians that HE wants to save them from outrageous gas prices and he knows how. It will also show that Meethead, Lizard and PM Bollywood don’t care about the pocketbooks of anyone, they LOVE high gas prices and have no plan other than more pain!
            I didn’t mention Mr 1%, no need to.

  16. Expect Quebec to offer “variable pricing” on it’s electric power pricing, depending on your political leanings, at home and to the USA. Soon. Alberta/western Kanaduh supplies 40% of Quebec’s fuel needs, currently. The rest is off shore, of which a goodly % is Saudi supplied. Quebec resists western crude in deference to Power Corps ME and foreign oil sources. Power Corp is in bed with the Chicoms….for decades, courtesy of the LPOC. Who do you think Chretien worked for in the private sector and continues to today? Have fun this winter Quebec, Ontario, eastern Kanaduh. You’ve made your beds on this issue alone. The commie LPOC has sold you out, long ago.

    I’m forecasting a long cold winter. Coal will make a comeback and carbon taxes will be dumped. You read it here first. We out west have 300 years of supply of just coal.

  17. There’s really nothing SA can do. They’ve been fighting and failing for years in Yemen and just about all they accomplished was to demonstrate that their armed farces are just that. It is entirely possible that the Houthis could bleed into SA as a Shi’ite insurgency that wins. I’d welcome this-SA is one of the leading kernels of Islamic theocracy. Burn this mother down!

    Oh and oil self-sufficiency is a canard. Oil is fungible your prices will still massively increase.

    1. Self sufficiency in an emergency is everything. Governments have a great degree of latitude during a crisis. Prices would go up but the oil producing provinces would ensure their citizens have access to gasoline, heating fuel, diesel.in fact, Alberta and Saskatchewan have a glut of oil without curtailment. Non oil producing provinces have no such guarantee. During a supply disruption where would you rather be?

      And, you’re not always forced to pay spot prices. Sask utilities buy natgas at low prices, stores it in old mine caverns and uses it during the winter to keep prices low. Do BC, and the eastern half of Canada have sufficient oil storage reserves in storage if there is a disruption?

      A map to show which parts of North American have good access to fossil fuels and which are vulnerable.

      https://i0.wp.com/global.nationalreview.com/images/pic_murdock_121211_A.jpg

      1. We have market mechanisms for this. This is what prices are for. If the prices go up, money should move to who has the stuff and the stuff should move to whoever’s paying.

        1. Not with the lack of domestic oil pipeline capacity in the eastern half of Canada. If the foreign market product is severely restricted or dries up and domestic product cannot get to the market, then that market mechanism fails.

          All the money in the world won’t make a bit of difference without having the ability to bring petroleum products to the market. Western Canada will pay market price but the petroleum supplies will be as full as they are now.

          Look at the map I attached. There’s very few pipelines going into the eastern half of Canada. Railways are already maxed out moving western Canada oil. And that oil all goes to our customers in the US – customers who buy our oil without making demands, talking about a social license, guilt mongering or otherwise complaining about our “dirty oil “.

    2. Where would you like to be this winter, Quebec, Ontario or the west excluding BC, if supplies get short?

  18. the good news, mebbe this will cause SA to blast any and all facilities of iran etc capable of flinging a drone at them.
    not certain how that would work however.
    but, that way the flak all stays in the ME.

  19. Mike Pompeo said there’s no evidence that these are drones that struck Saudi facilities. Some are speculating that they were cruise missiles launched from Iran or Iraq.

    1. If it wasn’t cruise missiles, it was probably missiles fired from drones or large drones loaded with explosives.
      When Iran got that “stealth” drone from Obama by jamming it’s guidance it would have been at least useful to reverse engineer it
      to use for an attack like this.
      https://en.wikipedia.org/wiki/Iran–U.S._RQ-170_incident

      Obama sold KSA Patriot missile batteries but KSA used them to surround and protect Mecca. Priorities, priorities.
      Iran has a population of 82.5 million and KSA has 33 million, many of whom are foreign workers. On population alone, KSA does not have a good starting point for waging war against Iran.

  20. The message being missed here is that the strike demonstrates how useless $50 million F35’s are, compared to a couple of dozen $10k drones. Numerous war game simulations have found that a very large number of powerful units, even if relatively immobile and unguarded, defeats most conventional forces. In the past, it might have been difficult to send men out in such units; it would have been bad for morale if nothing else. But, UAV’s eliminate this problem.

    Let’s hope the new PM has the sheer brilliance to jettison the fighter acquisition, and instead invest in domestic drone defense.

    1. Drones can be jammed. That’s how Iran got the design for the drone it probably used in this attack.
      A drone could not be used to prevent a Russian Bear from entering NORAD airspace or deterring a cruise missile attack from said Bear.

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