As winter nears, worry over energy costs
Analysts review oil stability after the attack in Saudi Arabia. Prices are already higher than last year.
Nearly every day, giant tankers carry 8 million barrels of oil from Saudi Arabia to refineries around the world.
But after the recent bombing in Riyadh, energy analysts are nervously reassessing the stability of supplies of crude from the oil kingdom.
Since oil prices are relatively high entering winter, Americans will notice any further problems in Saudi Arabia as they fill up their gas tank or pay for home heating oil. The price for West Texas crude closed above $32 a barrel last week, the highest point since the beginning of October and up from about $25 a barrel last year at this time.
The higher price of crude is already reflected in steeper costs than last season: Home heating oil is up some 19 cents a gallon, and gasoline is 9 cents a gallon higher.
"The only thing keeping prices above $25 a barrel is fear of terrorist activity," says Dennis Gartman, publisher of the Gartman Letter, an influential political and economic newsletter. "All things being equal and if there are no terrorist attacks, these are very high prices."
The uncertainty over oil prices comes at a time when Congress is getting ready to vote on an energy bill, which was approved by most Republicans late last week. The proposed legislation does not include opening the Arctic National Wildlife Refuge, but it does have incentives for producers of ethanol, which could help reduce oil imports.
For now, though, the US depends heavily on Saudi Arabia for oil. In terms of that arrangement, one key concern, says Mr. Gartman, is the long distance that Saudi Arabia moves its oil to terminals.
"The pipelines are long and exposed as they move across the desert," he says. "I don't care how vigilant you are, there are places that you are not defending."
So far, however, there have been no attacks on the pipelines, producing areas, or terminals. The most recent attack was on a housing complex. But energy analysts are taking seriously such a target - more political than economic - particularly since Saudi Arabia is the second-largest supplier of oil to the United States and represents one-third of all oil produced by OPEC.