Barrel of oil 'will rocket to $200-$300' if restless Saudis rebel
Massive increase would slash Irish economic growth by 4.5pc
OIL prices could rocket to between $200 and $300 a barrel if Saudi Arabia is hit by serious political unrest, former Saudi oil minister Sheikh Zaki Yamani told Reuters yesterday.
Mr Yamani said he saw no immediate sign of further trouble in the world's biggest crude exporter following protests last month calling for political reforms but said that underlying discontent remained unresolved.
The Department of Finance warned earlier this week that every $10 rise in the price of oil would slow growth here in Ireland by 0.25 percentage points. Using that rule of thumb, growth here would be slashed by 4.5 percentage points if oil hits €300 a barrel, an event that would constitute another brutal contraction.
"If something happens in Saudi Arabia it will go to $200 to $300. I don't expect this for the time being, but who would have expected Tunisia?" Mr Yamani told Reuters during a conference of the Centre for Global Energy Studies which he chairs.
"The political events that took place are there and we don't expect them to finish. I think there are some surprises on the horizon," he said in a speech.
Saudi King Abdullah offered $93bn in handouts to his long-suffering subjects last month in an effort to stave off unrest. So far, demonstrations in the Kingdom have been small in scale and police were able to easily disperse a Shi'ite protest in the oil-producing eastern province last month.
But Mr Yamani said that the reluctance of people to participate in popular protests was merely concealing underlying discontent. "Some people relax about the situation in Saudi Arabia because the Saudi Islamic brand prohibits people to go to the street and to talk," he warned.
Oil traded at two-and-a-half-year highs above $121 a barrel yesterday. Libya's rebellion has shut its oil exports, stoking fears of disruptions in other major producers.
Mr Yamani, responsible for Saudi oil policy from 1962-1986, predicted in 1990 that crude, near $20 at the time, could rise to $100 a barrel if Iraq's invasion of Kuwait led to war.
In the event, oil peaked at just $41 because Saudi oilfields escaped damage in the first Gulf war and it was another 18 years until oil broke the $100 mark.
While some analysts at the CGES conference were sceptical that protests would break out in Saudi on the same scale as Egypt or Libya, Jaafar Al Taie, managing director of Manaar Energy Consulting, warned: "I don't think that what the king is doing now is sufficient to prevent an uprising. Saudi Arabia is a timebomb, but one that is constantly being reset."
Saudi Arabia is the effective leader of the OPEC and the only country with any significant spare production capacity.