With oil playing such an important role in transportation, energy, and manufacturing worldwide, supply disruptions pose a serious threat to the global economy and political stability. Earlier this year, the Herzliya Conference convened a group of experts and practitioners from a range of specialties around the world to participate in a war-game that examined a possible oil-shortage scenario: a global oil crisis initiated by a terrorist attack on the Saudi Arabian Abqaiq oil facility. Under the conditions of the simulation six million barrels of oil per day were removed from global markets, resulting in a shortage of millions of barrels per day over a prolonged period in which no spare capacity was available from other producers.
The conference found that the immediate outcome of the sustained shortage of oil supply would be a considerable spike in global oil prices, which could reach USD200 per barrel. This would serve to plunge the global economy into a recession and destabilize the Middle East. Participants recommended reducing dependencies on oil at large and on Saudi oil reserves specifically and enhancing global preparedness and policy awareness, and enlarging the membership scope of the IEA to include large economies like China and India.
What type of impact would such a scenario have on the United States? What can the United States do to safeguard against this type of incident? If an international effort is needed to protect global markets from a similar oil crisis, what can the U.S. do to move in that direction?