OAKLAND, Calif. (KTVU) - In a shocking development, a multiple drone attacks on Saudi Arabian oil facilities has taken out as much as 5% of the world's oil supplies; a event sure to have impact at the gas pump.
Yemeni Houthi's, closely aligned with Iran, claimed credit for the attack on two massive Saudi oil production facilities with ten sophisticated drones armed with high explosives that struck the kingdom and its economy hard.
Explosions, followed by raging fire and thick black smoke, it the latest and gravest chapter the long conflict between Yemen and Saudi Arabia.
Severin Borenstein, a renowned energy economist at UC Berkeley's Energy Institute at the Haas School of Business said, "before this attack occurred, the market has been pretty well supplied. And prices have been quite calm. They've sat in the mid-$50 range in the United States for months now."
Reports suggest that the attacks have taken out about 5% of world supply.
"If you took out 5% of the world oil supply for more than a day or two, that would drive prices up quite a bit, said Professor Borenstein.
How much and how fast?
"If, by Monday, it looks like if there's a few percent or five percent of the world supply has been taken off-line and is going to stay off-line, there's going to be a very big jump in the world price of oil. It wouldn't surprise me if we see a $10 or more jump in the price," said Borenstein.
Though the U.S. imports very little oil these days, oil trades at world prices.
So, for every $10 a barrel that the price of crude oil goes up, you can add 25 cents to the price of a gallon of gasoline.
That's $3 to $4 more dollars for an average tankful and only if the price of crude goes up just $10.
"So, 'energy independence,' as some people refer to is, it not price independence. It does not protect us from these sorts of interruptions," said Borenstein.
The Saudis have said they expect to bring their facilities back online quickly, but from the looks of the widespread damage, that may be wishful thinking at best as well seen here with any number of refinery explosions.
Beyond this specific damage, no one knows if there will be more attacks on other facilities in the Middle East and beyond.
"Oil traders are going to be very concerned about this going forward. The higher potential risk and that is likely to push up oil prices." said Borenstein.
Expect more oil drilling and fracking to be approved by the Federal government since it still seems Americans are more concerned about the availability of gasoline than price.