Attacks on Saudi oil installations

By Stéphanie Kelly

NEW YORK (Reuters) – Saturday's attack on Saudi facilities has caused the biggest interruption in oil supplies for over 50 years. Here's what it could mean for consumers:

Where will I feel the cost increases?

Consumers around the world could see rising costs for products ranging from gasoline to diesel, home heating costs and air fares, after the attacks this weekend that caused a surge in world oil prices. As shipping costs increase, shipments of other goods, such as groceries, could also increase in the coming months.

HOW THE PRICE OF THE OIL FACTOR IN THE PRICE OF DIESEL AND GASOLINE?

Crude oil is converted into fuel, including gasoline and diesel. When the price of crude increases, the cost of fuel increases with it. Other factors are also important in the retail price, such as local taxes and fuel regulations. Crude, however, is the most important factor.

"Crude represents 50% of the (US) retail price, so crude is increasing, so is retail," said spokeswoman for the American Automobile Association, Jeanette Casselano.

WHY IS SAUDI ARABIA SO IMPORTANT FOR THIS EQUATION?

Saudi Arabia is the world's largest exporter of crude and one of the largest producers. The attack cost him half of his production, 5.7 million barrels per day (bpd), equivalent to 5% of the world supply.

Saudi Arabia also holds almost all the oil capacity available in the world, which allows it to rapidly increase its production to offset any supply problems in the world. Thus, any further major disruption of supply will have a greater impact on oil supply and prices than it would have if Saudi Arabia had always an unused capacity.

Prior to the attack, Saudi Arabia was shipping 7 million barrels of oil a day worldwide, much of which was destined for Asian buyers.

When will prices start to rise?

Very soon. Pump prices react very quickly to movements in the futures markets, which rose sharply on Monday as a result of the attacks.

In the United States, motorists could see prices for gasoline at the pump start rising as early as this week and prices could rise to 25 cents this month. US oil and diesel futures traded on the New York Mercantile Exchange increased by more than 12% and 10%, respectively, on Monday.

How can the rising fuel price increase other costs?

Fuel prices, including diesel, which supplies the heaviest vehicles, such as trucks and farm equipment, are expected to increase. This will affect the transportation costs of the companies to ship the products from the factory and the farm.

Manufacturing industries that require a lot of energy, such as automotive production and chemicals, could also shift costs if their expenses increase.

Consumers could therefore see increased costs for items in their grocery stores, such as fresh produce, which often has to be shipped from other regions.

Increases in fuel prices are expected in the world's major economies as Asian countries are particularly sensitive to peaks in their energy-intensive manufacturing industry, said John Kilduff, a partner at Again Capital in New York.

Depending on the duration of Saudi exports affected, consumers could also experience an increase in the price of airline tickets, due to the premium price of jet fuel, said Phil Flynn, an analyst at Price Futures Group in Chicago.

Home prices could also increase significantly as demand starts to increase in the United States and Europe as temperatures drop before winter.

WHY SHOULD THE PRICE INCREASE? IS NO OIL STORED IN THE WORLD?

Yes there is. Members of the International Energy Administration, headquartered in Paris, are required to stock at least 90 days of imported products and / or imported products in such cases. The United States has already indicated that they could use their oil reserves if needed, and Saudi Arabia also had sufficient storage space to cover exports for some time.

However, global markets are still affected as it is unclear exactly how long Saudi Arabia will need to repair the damage and resume exports.

THE PRICES OF GASOLINE ARE NOT REGULARLY TODAY?

Yes. The average price of a gallon of regular gasoline is currently $ 2.56, according to the American Automotive Association. This is far from the levels usually associated with a reduction in consumer spending. In 2008, in the context of a global economic slowdown, soaring oil prices took the average gallon of gasoline to a record $ 4.11, according to AAA.