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Energy markets expert Dr Anas Alhajji, commercial broker Pat Hemsworth, and petroleum geologist Art Berman form a panel to discuss energy. They consider the market reaction to the Abqaiq attacks in Saudi Arabia and the possible long-term and short-term effects. Crude oil streams and supply are no concern, but the panel sees the future of oil and other fossil fuels changing due to security risks. They agree that oil will stick around for now despite a lot of noise around renewables. For example, they point out that electric power as an alternative to oil comes with its own environmental issues such as disposal of the toxic waste. From an economic perspective as well, the EU collects billions of dollars in gasoline and diesel taxes, and it is unclear how they will make up for this cash inflow without these sources of energy. Lastly, the panellists dispute US claims that the country is no longer oil dependent and underline how quality and logistics makes it difficult for them to be independent.
Why does this matter? Following the drone attacks on the oil processing facilities in Abqaiq, Saudi Arabia, we must consider what impact this incident might have on global oil output and geopolitical risk premia. From a foreign policy perspective, the attacks add complications to existing US-Iran tensions. Moreover, a sharp spike in the oil price would be passed on to the US consumer – ahead of the 2020 presidential elections. In this scenario, the propensity for US oil supply to increase would be key to mitigating spillovers.