http://www.washingtonpost.com/wp-dyn/content/article/2006/03/03/AR2006030302046.\
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An Energy Pearl Harbor?
A Near Miss in Saudi Arabia Hints at Future Shocks

By Gal Luft
The Washington Post
Sunday, March 5, 2006; B02

"We call our brothers in the battlefields to direct some of their
great efforts towards the oil wells and pipelines. . . . The killing
of 10 American soldiers is nothing compared to the impact of the rise
in oil prices on America and the disruption that it causes in the
international economy." -- A jihadist Web site

The two cars that exploded a week ago outside the inner perimeter of
Abqaiq, an oil processing facility in Saudi Arabia that is the
world's largest, could have caused more loss of life and economic
devastation than the two planes that crashed into the World Trade
Center on Sept. 11, 2001.

Had the terrorists succeeded in penetrating the guarded facility and
detonating their bombs inside, they might have turned the complex
into an inferno, releasing toxic chemicals that could have killed and
sickened thousands of locals and expatriates, including many
Americans, who work and live nearby.

The damage to the world economy also would have been severe because
the oil market today resembles a car without shock absorbers: The
tiniest bump on the road could send consumers and prices bouncing off
the ceiling.

That wasn't always the case. Once there was enough wiggle room in the
oil market to deal with occasional supply disruptions. As recently as
2002, some oil producers, chiefly Saudi Arabia, had the spare
production capacity to provide liquidity to oil markets. But due to
the sudden growth in demand in developing countries in Asia and
continuing profligacy in industrialized nations such as the United
States, oil output is largely spoken for. In 2002, there were about 7
million barrels a day of spare production capacity, or about 10
percent of world consumption. Today, spare capacity amounts to about
1 million barrels a day, less than 2 percent of world consumption.

That's a lot less than what would have been lost if the car bombers
had succeeded at Abqaiq. The attack would have removed 4 million to 6
million barrels a day of supply from an already tight oil market.
That loss would have exceeded all of the oil taken off the market by
the Organization of Petroleum Exporting Countries during the 1973
Arab oil embargo. Depending on the extent of damage to the site, it
could have taken months or even years to fix the facility, where
two-thirds of Saudi crude oil is processed. Without extra supplies,
the only mechanism left to restore the market to equilibrium would be
a rapid and uncontrolled increase in prices.

This vulnerability isn't lost on radical Islamic terrorists. They
have identified the world energy system as the Achilles' heel of the
West and have made attacking it a central part of their plan.

Osama bin Laden's strategy is based on the conviction that the way to
bring down a superpower is to weaken its economy. We "bled Russia for
10 years until it went bankrupt and was forced to withdraw [from
Afghanistan] in defeat," bin Laden boasted in his October 2004
videotape. "We are continuing in the same policy to make America
bleed profusely to the point of bankruptcy." His logic, feasibility
aside, is simple: Bring the United States to a point where it can no
longer afford to preserve both its military and economic dominance.
Then, as the United States loses standing in the Middle East, the
jihadists can gain ground and topple regimes they view as corrupt and
illegitimate, while defeating other infidels who inhabit the land of Islam.

Striking oil, which jihadists call "the provision line and the
feeding to the artery of the life of the crusader's nation," is
relatively easy and effective. Terrorists no longer need to come to
the United States to wreak havoc here. They can hit our energy supply
near the source, where they enjoy strong support on the ground.

Politically motivated attacks on oil pipelines in Iraq have kept more
than 1 million barrels per day off the global oil market. Had this
oil been in the market, the price per barrel would have been $10 to
$15 lower, according to most energy analysts. For the United States,
an importer of more than 11 million barrels a day, the terrorist
premium alone costs $40 billion to $60 billion a year. Higher oil
prices mean a transfer of wealth of historical proportions from
oil-consuming countries -- primarily the United States -- to the
Muslim world, where 70 percent of global oil reserves are
concentrated. The windfall also benefits jihadists as petrodollars
trickle their way through charities and government handouts to
madrassas and mosques.

How vulnerable is the Saudi oil industry to kamikazes bent on
sacrificing their lives for the sake of disrupting the world economy?
Despite Saudi assurances that their facilities have the best
protection in the world, the terrorists were still able to penetrate
the outer perimeter of Abqaiq before they were killed.

And what about an air attack? A suicide terrorist hijacking an
airplane in Kuwait or Dubai in an attempt to crash it into one of the
facilities would leave the Saudis very little time to respond.
Al-Qaeda's statement following the Abqaiq attack that "we shall not
cease our attacks until our territories are liberated" must be taken seriously.

To compensate for the erosion in OPEC's spare capacity, major
oil-consuming countries need to create new cushions against possible
oil shocks. At its current capacity of 700 million barrels, the
Strategic Petroleum Reserve (SPR) can mitigate supply disruption to
the U.S. market, but it isn't big enough to tide over the global
economy if there were a severe disruption of oil supplies. If,
however, the SPR were expanded and Europe and Asia encouraged to
establish similarly large oil banks, the oil-consuming nations could
withstand a catastrophic failure of the Saudi system. It would make
the oil weapon less effective, and less alluring to terrorists.

Reducing petroleum consumption, especially in the transportation
sector, where two-thirds of U.S. oil is consumed, could also help
restore some wiggle room to oil markets. By shifting to domestically
produced transportation fuels like ethanol and methanol, or by
driving more efficient hybrid vehicles, Americans can reduce their
vulnerability to supply disruptions. Plug-in hybrid electric vehicles
could tap into the grid and use made-in-America electricity; unlike
in the 1970s, today only 2 percent of U.S. electricity is generated
from oil. In many cases of national security, the best defense
against foreign foes begins at home. Technology may not be able to
wean us from oil altogether, but it can reduce U.S. vulnerability to
an energy Pearl Harbor.

Gal Luft is the executive director of the Institute for the Analysis
of Global Security and co-chair of the Set America Free Coalition, an
alliance of national security, environmental, labor and religious
groups promoting ways to reduce America's dependence on foreign oil.

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Felix Kramer fkramer@...
Founder California Cars Initiative
http://www.calcars.org
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