Could Saudi Arabia weaponise oil again?
Gulf kingdom responds to sanctions threat by evoking memories of the 1973 oil crisis
Saudi Arabia has threatened to use its oil supplies to retaliate against any sanctions by the West over the death of Jamal Khashoggi, rekindling memories of the 1973 oil crisis which marked a defining shift in the post-war balance of global power.
The latest Saudi explanation for the death - that the dissident journalist died in its Istanbul embassy as a result of a fist fight - has met with scepticism in the west. US President Donald Trump has said the consequences could be “very severe” if the government in Riyadh is found to have ordered the killing.
The Saudis have responded by threatening a cut in global oil supplies which could push crude prices back up well above $100 a barrel.
It is a threat that brings back memories of 1973 when oil producing states held the West to ransom by quadrupling prices almost overnight, a move which had huge and wide-reaching ramifications for the global economy.
Writing in a personal capacity, Turki Aldakhil, general manager of the state-owned Al-Arabiya news channel, warned yesterday that the United States would “stab its own economy to death” and oil prices would soar to $200 a barrel if Washington imposes sanctions on Riyadh.
With the Trump administration already calling on Opec to bring down oil prices as its sanctions against Iran begin to take effect and with crucial mid-term elections less than a month away, “such an oil shock would come at a very sensitive time” says CNN Business.
However, there is debate about whether Saudi threats to hike the price of oil still carry the same conviction they did in the 1970s.
World oil markets have been transformed by a doubling in American output over the past decade, meaning America and the West have become much less reliant on oil from the Middle East.
According to the US Energy Information Administration, the United States imports just 9% of its oil from the Gulf kingdom, and import from Saudi Arabia have halved in 25 years.
An economy still overly-reliant on oil revenue, growing unemployment among a predominantly young population and a need to diversify “means, simply, that the country with most to lose from a sharp rise in oil prices would be Saudi Arabia itself” says Larry Elliott in The Guardian, calling Saudi threats “a gigantic bluff”.