Global oil prices could rise and become even more volatile if al-Qaida terrorists in the Middle East try to avenge Osama bin Laden’s death.
Many energy security experts caution that it’s too soon to make a judgment either way on what long-term effect bin Laden’s death will have on oil prices. Indeed, global oil prices are high largely because of the political revolutions occurring in countries such as Libya that are not directly connected to recent terrorism. Nonetheless, bin Laden's death has intensified the focus on the connection between Middle East geopolitics and oil prices.
“The political trends in the Middle East and North Africa major oil exporting region is going to be the heavier influence on oil prices,” said Christine Parthemore, an energy-security fellow at the Center for New American Security.
“But Yemen now sticks out as the real country to watch because it has both,” added Parthemore, referring to the fact that al-Qaida’s most active branch, al-Qaida in the Arabian Peninsula, is based in Yemen, and that the country is experiencing political upheaval.
To boot, Yemen sits at the mouth of the Gulf of Aden. About 10 percent of the world’s seaborne oil passes through that gulf, including oil from Saudi Arabia, the world’s largest producer and exporter. Parthemore said terrorists regularly try to attack petroleum infrastructure in Saudi Arabia, and noted that bin Laden’s death could trigger more efforts.
“I’m particularly concerned about reprisal attacks focusing on petroleum infrastructure there [Saudi Arabia] -- probably more so than is being represented in the media now,” she said.
Other experts said if terrorism occurs in Saudi Arabia or Yemen, oil prices could skyrocket.
“If the al-Qaida in the Arabian Peninsula were able to stir things up a bit and do something in or near the border of Saudi Arabia … I think you would see a very sharp move upward in petroleum prices,” said Charles Ebinger, who directs the Brookings Institution’s energy-security initiative and is a senior fellow in foreign policy.
Bin Laden’s death triggered an early – and short-lived – 2 percent drop on the global oil market Monday. Brent crude, a benchmark for global oil prices, was at $125 Monday evening after getting close to $110 earlier in the day.
Experts agree the oil market’s knee-jerk reaction won’t last.
“It was the instant sense of elation of the situation that hit [the market] the same way it hit most Americans,” Parthemore said. “I think this kind of shows the financial world needs to understand things like terrorism a little bit better.” The geopolitics of the Middle East are not uniform throughout the region, Parthemore said, and the initial drop in oil prices indicated a premature expectation that bin Laden’s death would create more stability in certain parts of the region. In the short-term, it could be the opposite.
“I think the market has gotten a little ahead of itself,” Ebinger said. “I think this is going to, in the near term, create a very dangerous situation. Not that I’m not applauding the event, but I think you’re very likely to see Pakistan become much more destabilized.”
The Pakistani Taliban said it will retaliate in reaction to bin Laden’s death. A spokesman for the group told Reuters in a phone interview on Monday that the Pakistani government and its army will be the first targets and the United States will follow. While this won’t have as direct an impact on oil prices as potential unrest in Saudi Arabia and Yemen, it exacerbates the overall unrest in the region, which would in turn increase oil prices.
As for the political debate over domestic gasoline prices, bin Laden’s death probably won’t distract lawmakers for long. Gas prices reached a nationwide average of $3.95 Monday, almost 10 cents higher than a week ago.
“Economics will still dominate the political debate here,” said Michael Levi, who directs the Council on Foreign Relations’ energy-security and climate-change program.