Oil at the Crossroads !

When one country launches an attack on the industry of another that is usually regarded as the first strike in an undeclared war.  The world's biggest oil field is in Saudi Arabia and this week a missile attack sent shock waves through financial markets at the prospect of an interruption to the fuel supply became a growing concern.

It was first reported that the strike had been caused by drones and very quickly the Houthi rebels in Yemen volunteered the confession that they were responsible.   World analysts judged that as unlikely because the Houthis lack the sophistication to have such weapons and it seems more likely that the attack originated in Iran.   The United States claimed it was a mix of drones and cruise missiles and named Iran as the aggressor.

Saudi Arabia claims that the damage is under control and that the reduction in the world oil supply is only five percent, but that comes at a time when spare world capacity is measured at just two percent.  As a result, the oil price increased sharply and here in Australia motorists are facing more to fuel their cars until full capacity is resumed.

This attack was a slap in the face to the Saudi's crown prince Mohammed bin Salman and we await the Saudi response.  The attack delivered proof that the aggressor has the capacity to circumvent the Patriot and Hawk missile defences bought from the United States.  That could spark a new arms race in the middle east to bolster defences.

Unfortunately, this brinkmanship between Saudi Arabia and Iran comes at a time when an election in Israel looks like delivering uncertainty.  Long serving prime minister Benjamin Netanyahu and his rival  Benny Gantz each won thirty-two seats in the Knesset.  Netanyahu is facing corruption charges and the government will be decided by where Avigdor  Lieberman places his support.

Netanyahu tried to rally last minute support by promising to annex most of the west bank  won from the Palestinians in the six day war and that would finally end all hope of ever establishing a Jewish and Arab state living side by side in the area.  Government uncertainty in Israel would not be helpful when cool heads are needed to contain this clash between Saudi Arabia and Iran.

The puppet master in this clash between two middle east countries is obviously Donald Trump.  His distaste for Iran is palpable.  Trump withdrew from the nuclear agreement despite Iran meeting the terms and he has reimposed the sanctions that are crippling the Iranian economy.   The only saving grace is that he must measure how his actions in the middle east will sit with the voters when he faces re-election next year.

Perhaps this uncertainty in the oil industry may be the deciding factor in convincing the car industry to seriously churn out electric cars - and get the public to buy them.   Both the Saudi's and Iran are oil giants.  A destructive war on their assets could prove to be a Pyrrhic victory  !