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Saudi oil field attack coverage feeds the new crisis mentality and vice versa

September 16, 2019

The Saudi drone strike is believed to be costing the most barrels of daily oil production ever.

The drone strike Saturday (September 14) against Saudi Arabia’s Abqaiq oil field—said to account for as much as 70 percent of Saudi petroleum production—is being estimated to have removed 5.7 million barrels a day-worth of oil from the world market, according to media sources including the Guardian newspaper.

In terms of sheer quantity, this is the single largest disruption to the world oil supply in history—being a 100,000 barrels-a-day more than the previous largest loss of daily production—the Iranian Revolution of 1978-79, which deprived the world of 5.6 million barrels of oil a day.

However, measuring Saturday’s attack on the Saudi oil field in barrels of oil alone is deceptive, if not dishonest, ignoring, as it does, the growth in oil production year-by-year.

In 1978-79, at the time of the Iranian Revolution, the world produced about 66.05 million barrels of oil a day. In 2018 (the most recent complete year) there was something like 94.7 million barrels a day produced globally.

The slice of pie (the size of the loss of the Abqaiq oil field in barrels) may be all important to the Saudi government but what matters to the rest of the world is the size of the slice lost in relation to the entire pie of global oil production.

It should not be ignored that between 1978 and 2018 that pie grew 43.37 percent.

This means that when seen as a function of total production, the loss of a 2018/19 barrel of oil is a much smaller thing than the loss of its 1978/79 equivalent, much the same way that a dollar has less purchasing power now than it did 41 years ago in 1978.

Forty percent less reason for catastrophic gas price increase

As a percentage of total world production the loss from the Saudi drone strike is not so striking.

The 5.7 million barrels a day-worth of oil lost to the drone attack on the Abqaiq field represents only 6.01 percent of global daily oil production in 2018, making it only the sixth-worst oil supply disruption in history.

Ahead of Saturday’s attack in Saudi Arabia is the Iraq invasion of Kuwait (1990-91), which took away 6.18 percent of world production; the outbreak of the Iran-Iraq war (1980-81), which represented a loss of 6.44 percent of all production and the Arab-Israeli war and embargo (1973-74), which cut 6.83 percent off the world’s daily supply of oil.

Second place goes to the Iranian Revolution, which disrupted a whopping 7.81 percent of total oil production and led to a 161 percent increase in the price of oil between 1979 and 1980.

And the greatest single disruption to the oil supply remains the Suez crisis of 1956-57.

At a time when the global production of oil was only 17.64 million barrels a day, the 2 million barrel-a-day loss from the Suez crisis represented 10.18 percent of all production.

This makes Suez almost a 41 percent-greater loss to global capacity than the Saudi drone strike. At the same time, It is hard to find evidence of a Suez-driven price increase in the price of oil above 7 percent.

On Friday the OPEC basket price of 14 crude oils was US$60.02. And since the Saturday attack, the price of Brent light crude oil has already gone up nearly two dollars, to $61.92.

But these are early days. There are breathless predictions that the “Saudi oil crisis” could send the price of a barrel of Brent light as high as $150-a-barrel—something like 150 percent above its pre-Saudi drone strike price—if a crisis atmosphere prevails.

A crisis of communication

The hyperbolic coverage of the Saudi oil attack as the worst-ever disruption of the oil supply (when it certainly isn’t) seems to me to be symptomatic of a new and pervasive drumbeat of catastrophe coming from all sides.

Whether we are talking about people in politics, business, or media (social or otherwise), everyone suddenly seems to have an interest in building everything up to the level of a crisis.

Once we spoke of “global warming,’ then “climate change”. All of a sudden “climate change” has become “climate crisis”. At the same time, the opioid epidemic has become the “opioid crisis”. And there is the homeless crisis, the mental health crisis and the housing crisis.

And it can’t be overstated that the “Saudi oil attack signals an escalating crisis“.

But, if everything is a crisis…then nothing is.

Perhaps calling everything a crisis is just something that professional communicators have learned that you have to do now in order to attract the notice of a jaded, over-mediated and attention-fatigued audience.

If so, then that is a real crisis. Click the images to enlarge them.

From → Newspapers, Politics

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