A satellite image captures damage to Saudi Arabia's east-west pipeline in the Hejaz region after a Houthi rebel attack Thursday. Black smoke billows from the pipeline. [Reuters]
A satellite image captures damage to Saudi Arabia's east-west pipeline in the Hejaz region after a Houthi rebel attack Thursday. Black smoke billows from the pipeline. [Reuters]

A grim outlook has emerged that the damage to Saudi Arabia's crude oil transport capacity is far worse than initially thought, and that the worst may still lie ahead for oil markets within the next two months. While Saudi Arabia is rushing to repair the damage, analysts warn that the kingdom could face even heavier strikes from Houthi rebels — an Iran-aligned force — during or after the recovery, given that the United States has refused to intervene in the conflict. With US midterm elections approaching and winter energy demand on the horizon, American politicians are weighing a diesel export ban, though experts say such a move would do little to tame surging prices.

The Washington Post reported Thursday, citing satellite imagery analysis of Saudi Arabia's east-west pipeline, that the damage is more extensive than previously disclosed. The Post said at least two pumping stations along the pipeline sustained damage.

Andrew Lipow, a consultant who advises on oil infrastructure, said satellite images of the Saudi pipeline show "a significant amount of damage" and that repairs would likely take "one to two months." He said Saudi Arabia would need to replace everything "from the piping to the valves to all the electrical equipment," adding that "this is not something you can just pick up off the shelf at Costco." He also noted that several pumping stations along the pipeline are particularly vulnerable to external attack.

Saudi Arabia's oil storage facilities have also suffered greater damage than publicly known. The Post, analyzing video and satellite imagery, reported that an Aramco bulk plant in Abha, a city in southwestern Saudi Arabia, was also hit in last week's Houthi attack. Analysis of satellite images taken Sept. 9 showed at least six storage tanks at the facility had been destroyed.

Saudi Arabia's ability to defend its crude supply has been severely undermined by Washington's refusal to intervene, analysts say, leaving the kingdom far more exposed to further threats. Brett Erickson, a geopolitical expert and board member at Seton Hall University's School of Diplomacy and International Relations, said "what has become clear is that Saudi Arabia has no ability to protect its own infrastructure," and claimed that three pumping stations — not one — were damaged in the Houthi pipeline attack Thursday.

Erickson added that it was deliberate that "the Houthis and Iraqi militias have stopped attacking the pipeline." He said the Houthi strategy is to allow repairs to reach roughly 95 percent completion before striking again to inflict maximum damage.

Analysts also said the Houthi rebels' concentrated attacks on Saudi oil facilities reflect a coordinated strategy with Iran. Iran is trying to drive up US oil prices ahead of the midterm elections to pressure the Donald Trump administration into negotiations, with the Houthis actively targeting Saudi energy facilities in support of that goal. Bob McNally, an energy adviser during the George W. Bush administration, predicted that Iran would "keep trying to push crude prices higher to pressure Donald Trump into submission."

US fuel prices are already surging. According to the American Automobile Association, the national average price of gasoline stood at $4.44 per gallon Thursday, while diesel reached $6.40 per gallon. Liz Thomas, chief market strategist at financial services firm SoFi, posted on X, formerly Twitter: "Five days ago I noted that based on the trend at the time, diesel could hit $6.65 per gallon by Election Day, Nov. 3 — and the trend has gotten worse. Diesel has already blown past $6.26 per gallon."

Experts fear the worst for oil markets as elections and the high-demand winter season approach. Tom Kloza, chief energy adviser at Gulf Oil, said Wednesday that "fuel margins haven't caught up to the earlier wholesale price increases yet" and predicted "shocking price increases at the pump for both gasoline and diesel." Patrick De Haan, head of petroleum analysis at price-tracking platform GasBuddy, posted on X the same day: "Buckle up. Gasoline and diesel prices look set to spike over the next 48 hours, with some inland areas taking the biggest hit."

US politicians are also weighing a diesel export ban in response to the sharp rise in fuel prices. Senate Majority Floor Leader John Thune, Republican of South Dakota, said Tuesday he was open to considering a diesel export ban. But experts immediately warned that such a move would only worsen the energy crisis.

Tracy Shuchart, chief economist at commodities trading platform NinjaTrader, posted on X that the diesel price surge "is a war problem compounded by refining capacity and crude quality issues," adding that "an export ban solves neither and makes both worse."


kate01@heraldcorp.com