Tensions in the Middle East have escalated following the drone attacks on two major oil facilities in Saudi Arabia. The attack on the world’s biggest oil processing plant has triggered the jump in crude prices in decades. Saudi Arabia’s total oil production has been cut down by 5.7 million BPD.
Saudi oil Attacks
On September 14, drones targeted the Saudi Arabia’s Abqaiq oil refinery and Khurais oil field. The attacks destroyed half of Saudi Arabia’s total output and 5 percent of Global oil supply.
Yemen’s Houthi rebels, have claimed responsibility of the attacks, they have been engaged in a war with Saudi-UAE-led coalaition since 2015. They have also warned Suadi Arabia that their targets “will keep expanding.”
But US secretary of State Mike Pompei has accused Iran of being behind the assault. As his claim had no strong evidence it was denied stating it was meant to justify the “actions.”
Meanwhile Saudi Arabia has promised to “confront and deal with this terrorist aggression”
United States has claimed to deploy additional troops and military equipments to Saudi Arabia to tighten the security.
However, this attack was on a much bigger scale, hitting the world’s biggest oil processing plant.
Saudi Arabia is the world’s biggest oil exporter, shipping more than seven million barrels on a daily basis. According to the sources, Saudi stocks stood at 188 million barrels in June.
Impact of the attacks on India
India is the third largest oil importer of the world and Saudi Arabia second largest supplier of crude oil and cooking gas to India.
India imports 83 percent of the oil it consumes, which gives India a reason to worry as the tension rises in the Middle East.
Earlier India used to import 10 percent of its oil from Iran, but after walking out after the nuclear deal US pressurized India to stop buying Iranian oil. It also imports from US but at a higher cost.
Bjp’s spokesperson and energy expert Narendra Taneja stated that Saudi was one among their safest suppliers in the world and to realize that their facilities are vulnerable makes them “anxious”.
He also said that, a lot would now depend on how Saudi Arabia reacts to the attacks as military action would disrupt the supplies and as of now India is worried about the price but if the supply is not resumed in the next two weeks, then we will have to worry about the supplies too.
The Indian government is already stretched financially and importing with higher cost will lead to economic slowdown.
The price of the petrol and diesel could rise if crude prices continue to rise globally.
It is said that every one dollar increase in the price of crude oil raises India’s import bill by 1.5 billion dollars every year.
It can accelerate inflation and affect many industries such as manufacturing and aviation.
That is not it, data from the oil ministry’s Petroleum Planning and Analysis shows that India’s dependency on oil has increased gradually since 2017.
In the year 2018-19, India’s oil consumption has increased to 2.11 million tons.
Experts claim that for now India can buffer supplies through reserves which will lasts for a month or so. If the crisis persists, India can cut taxes but that will affect the revenue and hence the fiscal deposit.
Speaking on the impact of the attacks RBI Governor Shaktikanta Das said “There is going to be an impact on the crude prices, there will be an impact on currencies across the world and the markets also and you would have seen it is impacting Indian currency.”
The geo-political event can lead to increase in the price of petrol and diesel which in turn may intensify the demand for return of state control on fuel pricing in India.
Such crisis instantly affects India as the economy is still emerging and we are mainly dependent on imported oil to meet the energy needs.
Well, in simpler terms the drone attacks on Saudi Arabia is like a nightmare coming true for oil-hungry countries like India and China.