Monday, 12 November 2012 16:52

Insecurity: Crude Oil Inventories

The future of energy insecurity has arrived. In August, a devastating cyber attack rocked one of the world's most powerful oil companies, Saudi Aramco, Riyadh's state-owned giant, rendering thirty thousand of its computers useless. This was no garden-variety breach. In the eyes of U.S. defense secretary Leon Panetta, it was "probably the most destructive attack that the private sector has seen to date."

What makes this kind of attack so worrying is the risk it poses to energy prices and hence the U.S. economy. Stopping oil production in Saudi Arabia could turn into a catastrophic loss of oil supplies. Even a short outage could cause prices to fly off the handle, setting off a scramble as market participants rushed to buy oil in case the shortage dragged on. Because the oil market is global in nature, a production outage anywhere can cause oil prices the world over to soar. U.S. officials should take note: A cyber threat to a company so central to the world energy market as Saudi Aramco poses a significant risk to the economic well-being of the United States.

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