The recent attack on Saudi Arabia’s oil infrastructure was the biggest since 1990, may change the global crude oil trade scenario. The attack compelled Saudi to cut down half of its oil production capacity – which is equivalent to 5 % of the world’s daily oil production. Because of sudden disruption, oil prices increased sharply by 20% and later on reduced as Saudi restored half of the production. And it will use its huge oil inventory to meet the demand meanwhile restoring 100% production capacity by the end of September.
But even though the damage has been solved speedily, the attack may change the scenario of world crude oil trade.
So, Who Gains?
1. U.S.A is both importer as well as exporter of crude oil. But since 2018 oil export significantly increased and taken momentum. US energy companies, especially based at Texas, New Mexico and North Dakota which were earlier, (that is before the attack ) struggling to get a better price due to increased supply of crude oil in the global market, can now take the benefit of the situation and increased oil rates and increased export. They can start/increase export to the countries like China, South Korea, Brazil, Japan which were dependant on Saudi.
2. Russia another major supplier of Crude oil and will benefit from increased oil prices by filling the gap of export, which was earlier done by Saudi Arabia. For Russia, every $1 increase in oil prices brings in $7.5 million in extra revenue every day.
And Who loses?
1. Saudi’s Abqaiq oil facility, which is one of the largest oil processing unit in the world, damaged by the attack. At Abqaiq, impurities and sulfur are removed from crude oil, which makes it less volatile. So that it can be exported safely. Now that the plant is damaged, even if the oil production is there, its export will be limited.
2. India’s oil import dependence is more than 80% and of the total crude oil import, 85% comes from OPEC nations. Due to Saudi refinery attack, India’s oil import will become costly, which may increase the fiscal deficit of the country.
3. China is the world’s largest oil importer, therefore will be worst hit by global crude oil crisis. Now, with a shortage of supply from OPEC nations, China has to find and depend on other sources of oil import. And has to bear the burden of increased oil prices.