Supply complacency

Sept. 1, 2014
Complacency comes easily in the US when the price of crude oil sags while hostilities jar the Middle East, while Russia tests Western resolve over Ukraine, and while China rattles its neighbors with territorial claims.

Complacency comes easily in the US when the price of crude oil sags while hostilities jar the Middle East, while Russia tests Western resolve over Ukraine, and while China rattles its neighbors with territorial claims. The temptation is strong to think growing supplies of oil and gas from unconventional resources in North America make the US invulnerable to market disturbance. That belief is dangerous. New North American supplies would not, for example, make the sudden loss of oil from Saudi Arabia inconsequential.

The kingdom lately has produced 10 million b/d of crude, 11% of global oil supply. The market couldn't lose that much oil without an economically damaging price surge. In the US, however, this once-standard worry now receives scant attention.

Incorrect assumptions

Two assumptions seem to guide current thinking. Neither is correct. One assumption is that diminished US reliance on imported oil insulates the US from the effects of disruption to Saudi supply. In fact, even if the country imported no oil at all, Americans would experience the same price increase as oil consumers everywhere. The other faulty assumption is that the susceptibility of Saudi Arabia to upset has waned.

The Saudi government doesn't believe that. In an Aug. 18 report, Lori Plotkin Boghardt, an area specialist at the Washington Institute for Near East Policy, writes of an official crackdown that began earlier this year against citizen support for terrorist groups. A new Saudi law makes backing specified groups a crime. One targeted group is the fierce Islamic State of Iraq and al-Sham (ISIS), which is ravaging Iraq and Syria and now calls itself the Islamic State. Also on the Saudi list is Jabhat al-Nusra, the Syrian affiliate of Al-Qaeda.

According to Boghardt, the Saudi government also has reinvigorated its campaign against militant, financial, and ideological support for terrorism. In July it disclosed investigations of 17 clerics who failed to denounce an Al-Qaeda attack in southern Saudi Arabia on July 4. Also in July, the chief of the religious police-known for enforcing dress codes and ensuring shops close during prayer times-told his subordinates their priorities now include eradicating extremist ideas and confronting anyone promoting terrorist principles. In August, the Interior Ministry revealed new requirements for security screening of preachers. And the Council of Senior Scholars, the kingdom's highest religious body, responded to rare criticism from the king by announcing a program against efforts to lure youths into fighting abroad. Speeches by the king and religious leaders and messages in state-controlled media, meanwhile, reflect what Boghardt describes as "a sharpened focus on the dangers of supporting terrorists." She adds, "Lately, the ISIS threat has been identified specifically."

Riyadh is responding to more than the bloody crises in Syria and Iraq, which are reasons enough to worry. In the July 4 disturbance, half a dozen members of Al-Qaeda in the Arabia Peninsula (AQAP), all of them Saudi, attacked a border checkpoint from Yemen, killing several Saudis and a Yemini guard. Two terrorists reached a government building well inside the kingdom and blew themselves up. In May, the government said it had discovered terrorist plots to assassinate officials and attack national and foreign interests in the country. Authorities arrested 62 suspects, most of them Saudi.

Need for stability

Despite these provocations, much of the public seems not to share the government's increasingly hardline view of the problem. Boghardt cites an informal poll showing most Saudis believe ISIS "conforms to the values of Islam and Islamic law." In a 2009 survey, she adds, 20% of respondents said they had a "somewhat favorable" or "favorable" view of Al-Qaeda.

Saudi stability remains globally crucial. Open militancy inside the kingdom is no hallmark of that condition. Even less so is divergence of the government from the governed over the nature of the threat.

Editor's Note: The editorial that appeared in this space last week was inadvertently duplicated from the Apr. 28, 2014, issue.