WI: 2006 Energy Crisis (Abqaiq Attack Succeeds)

Delta Force

Banned
On 26 February, 2006, Al Qaeda attacked the Abqaiq Complex in Saudi Arabia. It is one of the largest and most vital energy centers in the world, with up to 7 million barrels of petroleum passing through pipelines, desulfurization towers, and other processing facilities prior to being dispatched to ports for shipment (as of 2006, according to this article). While the terrorists were stopped by security and failed to make it to vital parts of the facility, a successful attack could have been catastrophic. If the desulfurization towers had been damaged, hydrogen sulfide would have leaked out and reacted with the air to form sulfur dioxide acid. The sulfur dioxide would have asphyxiated anyone in the vicinity and settled on pipes and other infrastructure, causing widespread corrosion. Even if only moderately successful, it's possible that up to 6 million barrels of petroleum would be removed from world markets for two months, and seven months after the attack with a shortfall of 4.2 million barrels would persist (book here).

With world petroleum consumption at 85.5 million barrels per day in 2006 (source here) and world energy markets already tight at that point in time, the world would have a shortfall of 7.0% of demand at the start of the crisis decreasing to a shortfall of 4.9% seven months out. The 1973 Energy Crisis that caused such havoc only involved a supply decrease of around 3.0% of demand, and of course it was a political crisis that could be resolved at any point in time. Abqaiq would be a technical and infrastructure crisis that would take months and possibly years to resolve.

So, what would be the impact of such a massive and (at least in the short term) irreversible loss of so much petroleum from world markets? Would world strategic petroleum reserves be sufficient to prevent a shortage, or would the duration and semi-permanence of the crisis overwhelm them? Might there be a repeat of the 1970s, with countries aggressively pursing nuclear and renewable energy programs and funding the development of alternative energy vehicles?
 
A major energy crises like the one you describe would cause a major economic crises worse than 1973-1974. By 2006 the housing market was reaching its peak, however many households were hit hard by the increase in fuel Prices. In the immediate term prices would sky rocket, some nations may even be forced to implement a form of rationing or have some cars of the roads on certain days of the week. In the Short to medium term reserves would be consumed while the search for new areas is expanded. The United States may lift restrictions on drilling in areas such as Alaska or the Arctic. Ethanol subsidies, Nuclear and renewabels would receive a renewed focus. General Motors and Chevrolet would be under increasing pressure due to the increasingly unpopularity and unfeasibility of their vehicles. Hard hit airlines would be even worse off, so more bankruptcies or mergers are probably the result. The demand for bicycling, and mass transit would increase. These trends would be greatly accelerated in the 2006 energy crises.

An increase in the cost of production would hurt China considerably, as the cost of economic expansion goes up. The Credit and housing bubbles could burst due to the reduced purchasing power of consumers, and the bankruptcies and reduces which are the result of such a crises. Would the recession be worse than what we got is difficult to judge. By Coming earlier it would mean that some of the excessive of 2007-8 would be curbed, but so much had been going on by this point that there would be aftershock. But as the amount of leverage in the system in 2006 was lower than 2008, it is likely the crunch could be smaller and seen as ONE of the causes of the crash. Another effect of the increased cost of living would be a rise of inflation, which may prompt the FED to increase interest rates. This could lead to a worse economic downturn, with the positive of reducing consumer borrowing and risky debt practices. Politically the Republicans would be in for a massacre in 2006, it could even be worse if that is possible. Governments would face increasing pressure to invest in alternative fuels and mass transit. Nuclear Power may even come back into Vogue, with new plants being constructed and commissioned. One area that would likely receive more investment would be corn ethanol. The tragic result would be worsening the 2008 food crises and the cost of living.

Politically the Middle East would be even more unstable, but this goes without saying. The Pressure to find Bin Ladin would increase, and may lead to his arrest sooner than OTL. Foreign interventionism as a whole would become a lot less popular, with the war scene as a cause of this attack although one could argue it would have happened anyway.
 

Delta Force

Banned
Using this petroleum price chart and this elasticity calculator, I've come up with some rough calculations of what the price of petroleum might be using the 1973 Energy Crisis as a point of comparison. I would have used an official source, but I couldn't find one.

In 1973, the price of a barrel of petroleum jumped from around $20 per barrel to around $50 per barrel following a 3% production cut. That gives an elasticity of demand of around 0.02. If that held in 2006, the price of petroleum could jump from around $80 per barrel of petroleum before the crisis to $360 per barrel shortly afterwards before settling to $280 per barrel seven months in. The major difference between 2006 and 1973 is that petroleum isn't widely burned for electricity, there are strategic petroleum reserves, and technology might make it easier to conserve energy.

Still, even a fraction of that jump would be catastrophic. The United States could face hyperinflation, as with petroleum at $360 there would be a demand for $28.62 billion dollars per day just to conduct petroleum transactions (the United States dollar is the international currency of petroleum trading). If prices and volumes remained that high for a year, there would be a total of $10.45 trillion in petroleum transactions. The total world economy was only $60.63 trillion in 2006, with the United States having a GDP of $12.31 trillion
 

Delta Force

Banned
Hey, my friend lived there (Abqaiq) during this attack. Worrying...

If successful, it could have been one of the deadliest terrorist attacks in history just in direct impacts. In addition to the workers at the petroleum fields and industrial facilities there's an entire city around it. There would also be also be the knock-on effects from the skyrocketing price of petroleum.
 

Delta Force

Banned
Anyone with more of an economic background know what kind of impact this would have on the overall economy from inflation and other effects?

The energy impacts would obviously be significant. I don't think the world strategic petroleum reserves would last long enough to make up the shortfall.
 
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