Attacks on Saudi oil facilities - what will it mean?
Skip to main content
  • Home
  • Economy
  • Stocks
  • Analysis
  • World+Biz
  • Sports
  • Splash
  • Features
  • Videos
  • Long Read
  • Games
  • Epaper
  • More
    • COVID-19
    • Bangladesh
    • Infograph
    • Interviews
    • Offbeat
    • Thoughts
    • Podcast
    • Quiz
    • Tech
    • Subscribe
    • Archive
    • Trial By Trivia
    • Magazine
    • Supplement
  • বাংলা
The Business Standard
WEDNESDAY, MAY 18, 2022
WEDNESDAY, MAY 18, 2022
  • Home
  • Economy
  • Stocks
  • Analysis
  • World+Biz
  • Sports
  • Splash
  • Features
  • Videos
  • Long Read
  • Games
  • Epaper
  • More
    • COVID-19
    • Bangladesh
    • Infograph
    • Interviews
    • Offbeat
    • Thoughts
    • Podcast
    • Quiz
    • Tech
    • Subscribe
    • Archive
    • Trial By Trivia
    • Magazine
    • Supplement
  • বাংলা
Attacks on Saudi oil facilities - what will it mean?

World+Biz

Reuters
17 September, 2019, 09:40 am
Last modified: 17 September, 2019, 10:12 am

Related News

  • Saudi Aramco becomes world’s most valuable stock as Apple drops
  • Saudi Arabia may hike oil price to record as supplies from Russia drop
  • Saudi Aramco 2021 profit soars on higher oil prices
  • Indian billionaire Adani explores partnerships with Saudi Aramco
  • Saudi Arabia raises oil prices as crude soars on Ukraine war

Attacks on Saudi oil facilities - what will it mean?

Here is how the recent attack on the biggest oil facility will affect the consumers

Reuters
17 September, 2019, 09:40 am
Last modified: 17 September, 2019, 10:12 am
Flames emerge from flare stacks at Nahr Bin Umar oil field, north of Basra, Iraq September 16, 2019. R
Flames emerge from flare stacks at Nahr Bin Umar oil field, north of Basra, Iraq September 16, 2019. R

The attack on Saudi facilities on Saturday caused the biggest oil supply disruption for more than 50 years. Here is what it could mean for consumers:

Where Will I Feel The Cost Increases?

Consumers around the world could see costs rise for products ranging from gasoline and diesel to home heating costs and air fares, after this weekend's attacks caused a spike in global oil prices. As the cost of transportation rises, that could mean shipments of other goods, such as groceries, could also increase in the coming months.

How Does The Price Of Oil Factor Into The Diesel And Gasoline Price?

Crude oil is refined into fuel including gasoline and diesel. When crude prices rise, the cost of fuel rises with it. Other factors are also important in the retail price, such as local taxes and fuel standard regulations. Crude, however, is the biggest factor.

"Crude accounts for 50% of the (US) retail price, so as crude goes up, so does the retail," said American Automobile Association spokeswoman Jeanette Casselano.

Why Is Saudi Arabia So Important To This Equation?

Saudi Arabia is the world's biggest crude exporter and one of the top producers. The attack removed half of its output- 5.7 million barrels per day (bpd), or the equivalent to 5 percent of global supplies.

Saudi Arabia is also the holder of nearly all the world's spare oil capacity - which means the ability to increase output quickly to compensate for any problems in supply worldwide. So any further large supply disruption will impact oil supply and prices more than they would have done if Saudi Arabia still had spare capacity.

Before the attack, Saudi Arabia was shipping 7 million barrels of oil around the world daily, much of it to Asian buyers.

When Will Prices Start To Rise?

Very soon. Prices at the pump respond very quickly to moves in futures markets, which have risen sharply on Monday in response to the attacks.

In the United States, drivers could see gasoline prices at the pump start to rise as early as this week and prices could climb as much as 25 cents this month. The US gasoline and diesel futures contracts on the New York Mercantile Exchange rose more than 12% and 10%, respectively, on Monday.

How Can The Rising Price Of Fuel Raise Other Costs?

Prices for fuel, especially diesel, which fuels heavier-duty vehicles such as trucks and farming equipment, are expected to rise. That will affect transportation costs for companies to ship products from the factory and the farm.

Manufacturing industries that require a lot of energy supply like automotive production and chemicals could also pass on costs if their expenses increase.

Consumers, therefore, could see costs increase for items at their grocery stores like fresh produce, which often has to be shipped from other regions.

Fuel price increases are expected throughout the world's major economies, with countries in Asia particularly sensitive to spikes because of their energy-intensive manufacturing industry, said John Kilduff, a partner at Again Capital in New York.

Depending on how long Saudi exports are affected, consumers could also see increased ticket prices for air travel because of a price premium on jet fuel for aircraft, said Phil Flynn, an analyst at Price Futures Group in Chicago.

Home heating oil could also get a bump in price, at a time when demand is starting to rise in the United States and Europe as temperatures drop ahead of winter.

Why Is The Price Expected To Rise? Isn't There Any Oil In Storage Worldwide?

Yes, there is. Members of the Paris-based International Energy Administration are required to keep at least 90 days of crude oil and/or products imports in storage in case of situations like this. The United States has already said it could use its petroleum reserves if needed, and Saudi Arabia also has enough storage to cover exports for a certain period of time.

However, markets globally are still affected because it is unclear how long Saudi Arabia will need to repair the damage and resume exports.

Aren't Gasoline Prices Relatively Low Right Now Anyway?

Yes. The average price for a regular gallon of gasoline is currently $2.56, according to the American Automotive Association. That's far short of levels typically associated with reduced spending from consumers. In 2008, amid a global economic downturn, a surge in oil prices pushed the average gallon of gasoline to a record $4.11, according to AAA.

Top News / Global Economy

Nahr Bin Umar oil field / Oil facility fire / Saudi Aramco

Comments

While most comments will be posted if they are on-topic and not abusive, moderation decisions are subjective. Published comments are readers’ own views and The Business Standard does not endorse any of the readers’ comments.

Top Stories

  • Social safety budget to stay same despite inflation rise
    Social safety budget to stay same despite inflation rise
  • Graphics: TBS
    Facebook and Bangladeshi politicians: A new tide in mass political communication?
  • RMG makers worried over move on power tariff hike
    RMG makers worried over move on power tariff hike

MOST VIEWED

  • Service members of Ukrainian forces who have surrendered after weeks holed up at Azovstal steel works are seen inside a bus, which arrived under escort of the pro-Russian military at a detention facility in the course of Ukraine-Russia conflict in the settlement of Olenivka in the Donetsk Region, Ukraine May 17, 2022. REUTERS/Alexander Ermochenko
    Fears for Mariupol defenders after surrender to Russia
  • Smoke rises from the Duvha coal-based power station owned by state power utility Eskom, in Mpumalanga province, South Africa, 18 February, 2020. REUTERS/Mike Hutchings
    Pollution killing 9 million people a year, Africa hardest hit: Study
  • China's Vice Premier Liu He exits the office of the U.S. Trade Representative following a morning round of negotiations on the second day of last ditch trade talks in Washington, U.S., May 10, 2019. REUTERS/Leah Millis/Files
    China Vice Premier Liu soothes tech firms, supports overseas listings
  • North Korean leader Kim Jong Un presides over a politburo meeting of the ruling Workers' Party, amid the coronavirus disease (COVID-19) pandemic, May 17, 2022, in this photo released May 18, 2022 by North Korea's Korean Central News Agency (KCNA). KCNA via REUTERS
    N Korean leader slams officials' 'immaturity' in response to Covid outbreak
  • A wounded service member of Ukrainian forces from the besieged Azovstal steel mill in Mariupol is transported on a stretcher out of a bus, which arrived under escort of the pro-Russian military in the course of Ukraine-Russia conflict in Novoazovsk, Ukraine May 16, 2022. REUTERS/Alexander Ermochenko
    Putin takes Mariupol, but wider Donbas victory slipping from reach
  • Crude oil storage tanks are seen in an aerial photograph at the Cushing oil hub in Cushing, Oklahoma, US, 21 April, 2020. PHOTO: REUTERS/Drone Base
    Oil prices climb on hopes of China demand recovery

Related News

  • Saudi Aramco becomes world’s most valuable stock as Apple drops
  • Saudi Arabia may hike oil price to record as supplies from Russia drop
  • Saudi Aramco 2021 profit soars on higher oil prices
  • Indian billionaire Adani explores partnerships with Saudi Aramco
  • Saudi Arabia raises oil prices as crude soars on Ukraine war

Features

As the dynamics between global powers change, Bangladesh must be proactive to keep up its balancing act. Photo: Reuters

‘The geopolitical landscape is undergoing profound change, Dhaka needs to craft proactive strategies’

14m | Interviews
Graphics: TBS

Facebook and Bangladeshi politicians: A new tide in mass political communication?

1h | Panorama
Despite Bangladesh having about 24,000 km of waterways, only a few hundred kilometres are covered by commercial launch services. Photo: Saad Abdullah

Utilising waterways: When common home-goers show the way

21h | Panorama
Illustration: TBS

How Putin revived Nato

23h | Panorama

More Videos from TBS

Paddle steamers in Bangladesh

Paddle steamers in Bangladesh

34m | Videos
Genome sequencing: best ways to diagnose pediatrics

Genome sequencing: best ways to diagnose pediatrics

1h | Videos
Reasons behind the sudden fall in stock market

Reasons behind the sudden fall in stock market

1h | Videos
The first mosque in India was built Prophet Mohammad time

The first mosque in India was built Prophet Mohammad time

14h | Videos

Most Read

1
Representative Photo: Pixabay.
Bangladesh

Microplastics found in 5 local sugar brands

2
Mushfiq Mobarak. Photo: Noor-A-Alam
Panorama

Meet the Yale professor who anchors his research in Bangladesh and scales up interventions globally

3
The story of Bangladesh becoming a major bicycle exporter
Industry

The story of Bangladesh becoming a major bicycle exporter

4
How Bangladesh can achieve edible oil self-sufficiency with local alternatives
Bazaar

How Bangladesh can achieve edible oil self-sufficiency with local alternatives

5
Govt tightens belt to relieve reserve
Economy

Govt tightens belt to relieve reserve

6
Impact of falling taka against US dollar
Banking

Taka losing more value as global currency market volatility persists

The Business Standard
Top
  • Home
  • Entertainment
  • Sports
  • About Us
  • Bangladesh
  • International
  • Privacy Policy
  • Comment Policy
  • Contact Us
  • Economy
  • Sitemap
  • RSS

Contact Us

The Business Standard

Main Office -4/A, Eskaton Garden, Dhaka- 1000

Phone: +8801847 416158 - 59

Send Opinion articles to - oped.tbs@gmail.com

For advertisement- sales@tbsnews.net

Copyright © 2022 THE BUSINESS STANDARD All rights reserved. Technical Partner: RSI Lab