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Texas Economy May Benefit From Saudi Oil Outage

Oil prices spiked after an attack on Saudi Arabia’s oil facilities on the weekend.

This Saturday, Sept. 14, 2019, satellite image from Planet Labs Inc., shows thick black smoke rising from Saudi Aramco’s Abqaiq oil processing facility in Buqyaq, Saudi Arabia.

A drone strike on Saudi Arabia’s oil facilities reportedly took out about 5% of the world’s daily oil supply on Saturday.

As a result, the price of West Texas Intermediate rose by as much as 14% to more than $62 a barrel as of Monday afternoon.

If the outage continues for some time, gasoline will be more expensive, said Ed Hirs, energy economist at the University of Houston. But he said the Texas and Houston economies will benefit.

“We’re up to 4.5 million barrels per day of production,” he said. “And raising the price would create a heck of a lot more economic activity than the impact of the higher price on the consumption side.”

Hirs said it’s hard to say how long prices will be up, depending on how quickly Saudi Arabia can repair the facilities.

“For a 1% decrease in supply to the world market, it’s a 25% increase in price if this is an extended situation,” he said. “And ‘extended,’ I’d say eight weeks and more.”

The Yemen-based Houthi rebels have claimed responsibility for the attack, but U.S. administration officials say they believe it came directly from Iran.

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Florian Martin

Florian Martin

Business Reporter

Florian Martin is currently the News 88.7 business reporter. Florian’s stories can frequently be heard on other public radio stations throughout Texas and on NPR nationwide. Some of them have earned him awards from Texas AP Broadcasters, the Houston Press Club, National Association of Real Estate Editors, and Public Radio...

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