Oil prices could rocket to US$200-US$300 a barrel if the world’s top crude exporter Saudi Arabia is hit by serious political unrest, former Saudi oil minister Sheikh Zaki Yamani told Reuters yesterday.
Yamani said he saw no immediate sign of further trouble following protests last month calling for political reforms but said that underlying discontent remained unresolved.
“If something happens in Saudi Arabia it will go to $200 to $300. I don’t expect this for the time being, but who would have expected Tunisia?” Yamani told Reuters on the sidelines of a conference of the Centre for Global Energy Studies (CGES) which he chairs.
“The political events that took place are there and we don’t expect them to finish. I think there are some surprises on the horizon,” he said in a speech.
Saudi King Abdullah offered US$93 billion in handouts in March in an effort to stave off unrest rocking the Arab world.
So far, demonstrations in the Kingdom have been small in scale and police were able to easily disperse a Shi’ite protest in the oil-producing eastern province last month.
But Yamani said that the reluctance of people to participate in popular protests was merely concealing underlying discontent.
“Some people relax about the situation in Saudi Arabia because the Saudi Islamic brand prohibits people to go to the street and to talk,” he said in a speech.
Oil traded at two-and-a-half-year highs above US$121 a barrel on Tuesday. Libya’s rebellion has shut its oil exports, stoking fears of disruptions in other major producers.
Yamani, responsible for Saudi oil policy from 1962-1986, famously predicted in 1990 that crude, near US$20 at the time, could rise to US$100 a barrel if Iraq’s invasion of Kuwait led to war.
In the event, oil peaked at just US$41 because Saudi oilfields escaped damage in the first Gulf War and it was another 18 years until oil finally broke the $100 mark.
While some analysts at the CGES conference were sceptical that protests will break out in Saudi on the same scale as Egypt or Libya, Jaafar Al Taie, managing director of Manaar Energy Consulting, said political change in the kingdom was inevitable.
“I don’t think that what the King is doing now is sufficient to prevent an uprising. Saudi Arabia is a time bomb, but one that is constantly being reset,” said Al Taie, whose firm advises foreign oil firms operating in the region.
Saudi Arabia is the effective leader of the Organization of Petroleum Exporting Countries and the only country with any significant spare production capacity.
Riyadh has lifted output to replace some of the lost Libyan production but many traders and analysts doubt its potential to expand output further.
Yamani said it was struggling to quickly get extra volumes of a new grade of the low-sulphur low-density “sweet” crude required by European refiners missing Libyan oil to the market.
“It is not that easy when there is an interruption of the supply in oil in Libya…We don’t forget that Libyan oil is very light and it’s a short-haul. There is a replacement, but not without difficulties.”
Leo Drollas, deputy executive director at the CGES, said the kingdom had provided over half or 550,000 barrels per day of the extra barrels pumped by Gulf countries to replace lost Libyan supplies. Kuwait and the UAE have also contributed additional output.