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Page added on October 13, 2018
Could The Clash Over Khashoggi Spill Into Oil Markets?
It looks like the United States and Saudi Arabia are heading for a major spat over the disappearance of Jamal Khashoggi, a Washington Post columnist and Saudi citizen who had been living in the United States. As always with questions of Saudi Arabia, this leads to concern about the oil market. If relations worsen between the two countries, what will happen to the global supply and price of oil?
U.S. President Donald Trump and Mohammed bin Salman (Mark Wilson/Pool via Bloomberg)
The answer is that the global oil supply would be fine. However, there could likely be a speculative spike in the price of oil, possibly reaching prices far higher any numbers predicted by analysts and banks this year.
Saudi Arabia has shown that it fights criticism forcefully, even criticism from other sovereign nations. Germany and Saudi Arabia are just now remaking relations after a year-old spat that resulted from a veiled German comment about the Yemen war. And Saudi Arabia essentially severed all ties with Canada this summer after the Canadian foreign minister criticized the arrest of two Saudi activists with ties to Canada. Saudi Arabia has historically taken a strong stand against criticism from other countries, even including the U.S.
It is possible that Saudi Arabia will try to overproduce oil to drop the price and appease President Trump (who has been asking for just this) in an attempt to overcome a dispute over Khashoggi. This would be a deviation of traditional Saudi government behavior, but it seems possible because the Saudi government is so reliant on the United States and American businesses for arms sales, diplomatic support, the American consultants who facilitate large parts of Saudi government programs, employment and education. However, if Saudi Arabia overproduced to try to ingratiate itself with the U.S., it would antagonize its OPEC partners and Russia and run the risk of permanently damaging the cartel through which it so strongly influences the oil market.
Saudi Arabia’s Minister of Energy, Industry and Mineral Resources and chairman of the board of directors at Saudi Arabian Oil Company (Saudi Aramco), Khalid A. Al-Falih (L) and Russia’s President Vladimir Putin (Photo by Sergei SavostyanovTASS via Getty Images)
Assuming Saudi Arabia would want to take a firm stand against American criticism (or even American sanctions), what can it do to hurt the U.S.?
Saudi Arabia is limited in its ability to respond to U.S. criticism. Saudi Arabia could refuse to export oil to the U.S., but the U.S. would survive with its own production (around 10 million barrels per day) and imports from the rest of the largely-fluid global market. However, Saudi Arabia would actually suffer. Saudi Arabia’s national oil company, Saudi Aramco, owns the largest American refinery which imports large amounts of Saudi oil. Aramco also owns many gas stations in the U.S. If Saudi Arabia prohibited exports to the U.S., Aramco would suffer first and most.
To actively raise the global price of oil on the international benchmark, Brent, Saudi Arabia would need to decrease its exports globally, since the market is global. Saudi Arabia is very unlikely to do this. It must continue selling to its customers in Asia, because 1) Aramco owns shares in many of those refineries that are customers, so decreasing the supply would again hurt Aramco; and 2) Aramco and Saudi Arabia have contracts with many Asian countries and the refineries to provide oil, so a disruption would be a major business fault. Moreover, and this is the big one, Saudi Arabia’s domestic stock exchange, Tadawul, is now heavily correlated with the price of Brent. Saudi Arabia does not want the price of oil to spike, because that could disrupt Tadawul so that no one can afford to trade shares, thus damaging the Saudi economy.
Historically, Saudi Arabia has increased and decreased production and exports to maximize profits but not to settle geopolitical scores. Of course, the leadership in Saudi Arabia is new and does not always follow the same guidelines.
Nevertheless, as with any global incident impacting oil, the real action is at the trading terminal . If this spat gets bad, look for nervous traders to buy. Speculation, more than anything else, could make the price of oil rise and rise and rise.
Ellen R. Wald, Ph.D. is a historian and consultant on energy and geopolitics. She is the author of Saudi, Inc., president of Transversal Consulting & a Senior Fellow at the Atlantic Council.
27 Comments on "Could The Clash Over Khashoggi Spill Into Oil Markets?"
GetAVasectomyAndLetTheHumanSpecieDie on Sat, 13th Oct 2018 7:52 pm
Some news from Québec.
Anti-racism protest held against Quebec premier-designate Francois Legault’s immigration views
https://www.youtube.com/watch?v=Hm1lx7oOsy0
Dumb leftist and mass migration is destroying Western countries and achievements like medical knowledge, electricity.
I love watching the Elite destroying the same financial system from which the derived their wealth.
There is only social chaos and blood coming forward.
Cloggie on Sat, 13th Oct 2018 10:51 pm
“Could The Clash Over Khashoggi Spill Into Oil Markets?”
No. Everybody expresses his “concern” and the story just blows over. Arab potential defectors will be more prudent.
Cloggie on Sun, 14th Oct 2018 3:28 am
OT – continuing the discussion we had yesterday about Italian finances. There is only one reason why Italy has such an exceptional high public debt:
https://www.thelocal.it/20160907/italians-europe-vat-tax-evasion-dodge-again
“Italians are Europe’s worst tax cheats (again…)”
There is nothing wrong with the rich Italian economy or “flawed euro”, Italy is fine, except that they are a nation of tax dodgers. In the old Lira days, the Italian government could simply print money and indirectly “tax” Italians with 10% inflation per year. With the euro that is no longer possible. Frankfurt is unlikely to fund Italy and create the next Greece. Ways out:
– Italy reintroducing the Lira
– Italians learning tompay taxes (haha)
– Every Italian household gets a mortgage imposed of 10k, which they can easily afford
US median wealth $55k
Italy $124k
See?
I think that none of the above will happen and that the new populist government will have to moderate its spending plans.
Cloggie on Sun, 14th Oct 2018 4:26 am
The US are not seriously going to hurt relations with the single most important cat flap they have to insert freshly printed dollars into the world economy at zero cost. If the world would refuse dollars and switch to real valuables instead (barter), the US would lose 35-40% GDP PPP and descend into the league of the likes of Slovakia. They already have the matching Flotus.
#MelaniaCountry
Davy on Sun, 14th Oct 2018 5:54 am
“US median wealth $55k Italy $124k See? I think that none of the above will happen and that the new populist government will have to moderate its spending plans.”
First nederextremist, do you have a link for you numbers because your extremism cannot be trusted? Second show us all the other numbers that describe an economy not your cherry picked one. What a friggin loser.
Davy on Sun, 14th Oct 2018 5:59 am
“The US are not seriously going to hurt relations with the single most important cat flap they have to insert freshly printed dollars into the world economy at zero cost. If the world would refuse dollars and switch to real valuables instead (barter), the US would lose 35-40% GDP PPP and descend into the league of the likes of Slovakia.”
More unsupported statements out of the nederliar. This is “35-40% GDP PPP” is a bogus number because no one knows how such a situation would occur and what would replace the dollar. This is also bogus because currencies do not drop in isolation but our board economic dummy does not want to understand these things. He wants to take situations out of context so they work to support his extremist agenda. We might also ask the Euro extremist what is going to happen to Euroland when the EU and the Euro collapse. I suspect it will be something similar to “35-40% GDP PPP” drop and it will likely be global with all other major economies dropping.
Cloggie on Sun, 14th Oct 2018 5:59 am
Last gasp of empire:
https://russia-insider.com/en/american-legislators-introduce-energy-bill-europe-you-read-right/ri25041
“American Legislators Introduce Energy Bill for Europe (You Read That Right)”
North-Stream pipeline to be built anyway.
Cloggie on Sun, 14th Oct 2018 6:05 am
“More unsupported statements out of the nederliar. This is “35-40% GDP PPP” is a bogus number because no one knows how such a situation would occur ”
That was wisdom I picked up from US MSM. But davy at the time refused to “watch my stupid videos”, so, as per usual, he descends into denial mode, because what should not be true, is not true.
Cloggie on Sun, 14th Oct 2018 6:09 am
“Clogmeister, sir, do you have a link for you numbers?”
I have posted the wikipedia link several times, among them yesterday. How about moving your lazy hillbilly ass and look it up yourself.
Davy on Sun, 14th Oct 2018 6:11 am
“That was wisdom I picked up from US MSM. But davy at the time refused to “watch my stupid videos”, so, as per usual, he descends into denial mode, because what should not be true, is not true.”
Nederliar, the burden of proof is on you in support of your extremist lies. Nobody here is coming to your defense. While I am not dismissing everything you say I do dismiss the package. The package is rotten and stinks. You are a racist Nazi pig that is going off the deep end of mental stability. I have watched your decline now for years. You used to be a half way descent person but now a disgusting example of how low humans can go intellectually bathing in lies and extremism.
Duncan Idaho on Sun, 14th Oct 2018 8:52 am
“the US would lose 35-40% GDP PPP and descend into the league of the likes of Slovakia.”
But Slovakia has a better educated public.
Sissyfuss on Sun, 14th Oct 2018 9:42 am
Davy, the Cloggedmind has been outed as a Nazi sympathizer and has completely abandoned his renewable portfolio. This shows where his hearts treasures are located, at the bottom of humanitys characteristics.
Davy on Sun, 14th Oct 2018 9:50 am
Right, neder’s interest in renewables is only in relation to his Eurocentric calculations. He thinks his nazi PBM can become an economic powerhouse based on a 100 renewable transition. His itty bitty intelect sees science and history as optional per his extremist package of lies regarding his PBM empire fantasy. neder does not care about climate change nor social justice. He is a racist nazi pig the dirties this board for people of any color who come here in search of energy news. You imagine being black and reading some of his shit? Disgusting.
Cloggie on Sun, 14th Oct 2018 12:03 pm
“You imagine being black and reading some of his shit? Disgusting.”
Strange that for years on end our “Canadian” friend anonymouse1 has been attacking YOU around the clock. This does not match your diagnosis that you somehow are seen as the Santa for “people of color”.
Btw, I can’t remember myself attacking people with different group identity. What I do attack is mass-immigration because eventually it will lead to civil war and genocide. But idiologues like dave and puss, intellectual simpletons without historic bagage, prefer to press on the “natzi” button, in an attempt to clamor down their inner doubt about the way their country is developing: into the abyss of competing ethnicities. Real arguments regarding history, don’t expect them from these punks, it’s demonization only. But they realize very well that they are not making a good impression on neutral bystanders.
Davy on Sun, 14th Oct 2018 12:33 pm
“Strange that for years on end our “Canadian” friend anonymouse1 has been attacking YOU around the clock. This does not match your diagnosis that you somehow are seen as the Santa for “people of color”.”
Speak English stupid.
Btw, I can’t remember myself attacking people with different group identity.
liar
Richard Guenette on Sun, 14th Oct 2018 12:39 pm
Here’s a suggestion: boycott all Saudi oil and slap the monarchy with sanctions (including freezing their assets).
I AM THE MOB on Sun, 14th Oct 2018 12:49 pm
Davy
I bet your wife moans like a whore when they rape her..
LMFAO!
I AM THE MOB on Sun, 14th Oct 2018 12:52 pm
I bet Davy’s wife would love to be gang raped..Better than what she gets from a pin dick like Davy..I bet she only married him for his parents money..And once that is gone, so will she be..
LMFAO!
Davy on Sun, 14th Oct 2018 12:54 pm
On second thought, I do attack all groups of people who are not flag waving uhmerikans. So I guess you do have a valid point, Sir Cloggie.
Davy on Sun, 14th Oct 2018 12:57 pm
translation: Davy kicked my ass yesterday as is the usual situation and now I am throwing air punches. What a degenerate idiot. A fine example of the liberal left in the US. LOL. I bet when collapsed day comes and MOB runs out and “breed” women like he brags about constantly, he gets his ass kicked by a woman.
I AM THE MOB on Sun, 14th Oct 2018 12:59 pm
See Davy I can steal your handle whenever I want. LOL
Davy on Sun, 14th Oct 2018 1:13 pm
Stop being so mean to me all the time MOB. My fragile ego can only take so much.
I AM THE MOB on Sun, 14th Oct 2018 1:17 pm
See Davy I did it again. I can do as I please.
Davy on Sun, 14th Oct 2018 1:22 pm
Come on MOB if you are going to steal my handle why tell us about it? What an idiot.
joe on Sun, 14th Oct 2018 1:33 pm
It’s weird that Erdogan was using this Pastor Brunson to gain leverage over Trump. Then this gem of a story dropped into his lap. My guess is Trump paid/did whatever Erdogan wanted to get some good news his way (that story is a legend waiting to be imortalised in film). Sadly the khashoggi story will blow over. Thats how it works with muslims. The Saudis will eventually compensate Turkey for the insult to their ‘guest’ the Americans want to bury this as quick as they can. Trump wants Saudi arms deals way more than he cares about a terrorist rogue state like SA, but thats kinda the point. Wanna talk rogue? Where’s those pesky WMDs? Remember who started it.
george on Sun, 14th Oct 2018 2:43 pm
BREAKING NEWS : The neighbors’ dog just took a dump on my lawn .
Anontarded1 on Sun, 14th Oct 2018 3:02 pm
brother joe the tard, i love you and i’m happy that you no longer tarded. you said assad a good guy then i told you by law muzzies require church steeples to be lower than minarets. scenario you describe with muzzie erdogan blackmailing supertards america is the same as paki muzzies blackmailing EU for the release of asia bibi.
this muzzie requested concession for release of bibi.
https://www.youtube.com/watch?v=anU9JU1eVPQ
but we constantly hear eurotard said eu is perfect, it’s the entity that shape the new world *caugh*..that’s when we’re not being told about PBBM