Ready for a Saudi Black Swan Oil Super Spike?
Source: Forbes, Christopher Helman (3/9/11)
"Prince threatens to 'cut off any finger' raised against the regime."
Speaking at the CERAweek conference in Houston yesterday, Jadwa Investments Economist Brad Bourland said, "The protests on Friday are probably going to be a non-event."
But what if they are an event? Would the Saudis attempt to crush an uprising with as much violence as Gaddafi has? After all, those 8,000 pampered members of the royal family have a lot to lose.
With all the talk in the past three years of Black Swan events, it is worth thinking about what would happen to world markets if Saudi Arabia descended into chaos. A well-placed bomb on a pipeline leading from the mighty Ghawar field could knock off 5 million barrels per day.
The conventional wisdom before Libya's civil war broke out was that the world had an oil cushion of roughly 4 Mbpd of production capacity on standby–nearly all of which is held by the Saudis. Yet today, Ambrose Evans-Pritchard in the Telegraph quotes Goldman Sachs' Jeff Currie on his belief that the Saudis had already been ramping production in recent months, and after factoring in the 1 Mbpd of Libyan oil currently offline, OPEC's spare capacity has already dropped below 2 Mbpd.