WASHINGTON (Reuters) – World oil prices could triple if the diplomatic standoff over Iran’s nuclear program escalates into a military conflict, Saudi Arabia’s ambassador to the United States said on Tuesday.
Assuming oil prices were at current levels near $70 a barrel at the time of an attack, “You would see that (oil price) perhaps double or triple as a result of the conflict,” Prince Turki Al-Faisal said at a press conference hosted by the United States Energy Association.
“The idea of somebody firing a missile at an installation somewhere will shoot up the price of oil astronomically,” Al-Faisal said.
Saudi Arabia is the world’s biggest crude oil exporter and the leading voice within the Organization of Petroleum Exporting Countries.
Oil traders have been worried that Iran, OPEC’s second biggest oil producer, may halt exports if there is an escalation in the dispute over the Islamic republic’s nuclear program.
President George W. Bush continues to emphasize diplomatic efforts, although he has declined to rule out military options should talks fail.
Tehran has yet to respond to an offer made by world powers to end the standoff, but it said on Sunday a “positive atmosphere” had been created that could help resolve the dispute.
Because all Middle East producers depend on the Strait of Hormuz to get their oil to market, military action in Iran would jeopardize the entire region’s oil flows, Al-Faisal said.
Oil flows through the strait account for roughly two-fifths of all globally traded oil, according to the U.S. Energy Information Administration.
Some 17 million barrels of oil are carried through the narrow channel on oil tankers every day, according to the International Energy Agency.
If there was an attack on Iran, “the whole Gulf will become an inferno of exploding fuel tanks and shot up facilities,” Al-Faisal said.
In such an event, the kingdom would “hopefully defend our oil installations as best as we can,” he said.
Al-Faisal said terror attacks on Saudi oil targets were a constant threat, but said the kingdom has instituted rigorous security procedures to prevent them.
Nawaf Obaid, managing director of the Saudi National Security Assessment Project in Riyadh and a private security and energy adviser to Al-Faisal, said the kingdom has budgeted more than $2 billion in 2006 for oil facility security.
That figure has steadily risen from $1.2 billion in 2004 and $1.5 billion in 2005, Obaid said in a recent report.
In February, the kingdom’s Abqaiq facility — the world’s largest oil processing plant — was attacked in a failed effort by al Qaeda.