Highlights
– A possible drop in Yemen’s marginal oil export capacity will have little impact on the price of oil
– The use of oil infrastructure attacks by a small armed tribe in Yemen is represents the dispersion of al-Qaeda tactics among militant groups
– In the long term, a successful attack against a major global oil producer is inevitable
On November 5, 2007, Yemeni tribesmen attacked an oil pipeline in the eastern Marib province at dawn. In a repeat of a 2003 attack against the same pipeline, Marib tribesmen—former members of the pre-Civil War Communist north—hope the pipeline attack will pressure the government for better schools, roads and services, as well as the release of prisoners. Likewise similar to the 2003 attack, the attack is unlikely to impact global oil prices. However, the pipeline attack may negatively impact Yemen’s bid to attract foreign direct investment (FDI).
Impact on Global Oil Price
The November 5, 2007 oil pipeline attack is unlikely to impact the global oil prices on a long-term basis for two reasons: first, the attack did not impact Yemen’s oil export operations; and second, Yemen’s contribution to the global oil market is relatively small. The attacked pipeline transports oil to storage tanks where it is held prior to shipment. The assertion by Yemeni officials that its export operations would not be affected likely indicates that sufficient oil for export was already held in storage tanks prior to the attack. Therefore, if oil workers in Yemen successfully repair the oil pipeline, the impact on Yemen’s oil export capacity will be negligible. On the other hand, if the oil pipeline remains down in the coming days, Yemeni oil exports will experience a slight decline.
Nonetheless, the impact of the pipeline attack on the global price of oil will be insignificant because Yemen’s oil export capacity is relatively small and a high ‘terror risk premium’ is already applied to the global oil price. Compared to its neighbors in the region, Yemen exports approximately 330,000 barrels per day (bpd), while Saudi Arabia (8,651,000 bpd), Iran (2,519,000 bpd), and the United Arab Emirates (UAE) (2,515,000). With its neighbors producing twenty-six times its export capacity, a drop in Yemen’s oil export to 165,000 bpd (half its total production capacity) in a global oil market that produces 32 billion barrels per day (bbl/d) will produce little to no effect.
Oil Infrastructure Attacks Increasingly Popular
What is significant about the Marib tribesmen’s oil pipeline attack, both in 2003 and in 2007, is that it is evidence of a spread in the popularity of attacking national oil infrastructure. National government fully recognized the strategic significance of oil during the 1970s oil embargo, but was not until the Iraq War and al-Qaeda’s 2003 call for increased attacks against oil pipelines and infrastructure that insurgent groups fully comprehended its import. Since al-Qaeda leader Osama bin Laden designation of oil as a primary target, the instance of oil infrastructure targeting increased significantly.
Today, the bin Laden message has saturated the militant market. At a time when Yemen is brokering oil exploration rights to eleven offshore blocks to international investors, the Marib tribesmen could not have picked a better target. In the Middle East and possibly elsewhere, al Qaeda and like minded groups will continue to target oil facilities to affect global prices. Other terrorists—such as Mexican militants and Nigerian ethnic tribes—will also target facilities in order to leverage their local governments.
Therefore, attacks against oil pipelines and infrastructure will continue for the mid to long-term. Though major oil producers, like Saudi Arabia and the UAE, have uncovered and averted past plots to target their infrastructure, it is impossible for oil producers to defeat all attacks indefinitely. In the long-term, a successful attack against one of the top global oil producers is inevitable.
