Saudi oil fields attack could spell bad news for Louisiana’s petrochemical boom

Saudi Arabia
An image from a video broadcast on the Saudi-owned Al-Arabiya satellite news channel, showing smoke from a fire at the Abqaiq oil processing facility fills the skyline, in Buqyaq, Saudi Arabia. (The Associated Press)

A drone attack on the world’s largest oil processing facility in Saudi Arabia has chilling implications not only for Louisiana’s petrochemical industry but for the world’s economy, according to a leading energy industry expert at LSU.

The weekend attack on the facility that produces some 20% of the world’s oil supply has led to a 10% jump in crude oil prices as of this afternoon, a slight decline in the stock market and a lot of global uncertainty, says David Dismukes, executive director of LSU’s Center for Energy Studies.

Worse still, the U.S. will have to respond to the attack or it will risk looking weak on the world stage. Over the weekend, President Trump tweeted that the U.S. is “locked and loaded,” suggesting a strike against Iran or another power in the Middle East may be forthcoming.

“This is serious for everybody—not just us—but everybody,” Dismukes says. “There is going to be a response and it is going to have implications.”

The biggest likely implication from an economic standpoint is a slowdown in activity, says Dismukes, who notes the global economy was already sluggish. That’s problematic for Louisiana because much of the planned industrial expansion in the state’s petrochemical industry is based on projected exports that may no longer materialize.

“This will impact all of our projects in south Louisiana because they’re all configured on growth projections of 6 percent to 8 percent in Asia and around the world,” he says. “Those markets were already softening.  Asia was already down to 6 percent. Now you’re taking a soft situation and making it softer.”

Though Louisiana has abundant, low-cost natural gas, which also serves as a feedstock for many of the area’s plants, that advantage won’t necessarily amount to much if the demand for the exports they produce dries up, as it could.

“Even if you’re a low-cost provider, if there’s nobody buying your stuff, it doesn’t matter,” he says. “It’s really what it means for demand and demand was already not looking good so that is a huge big mosh pit.”

Dismukes say all eyes will be on the U.S. response to the attack, the Federal Reserve’s actions and what other countries do in response.

“It’s not just what’s happening today that we have to be watching,” he says. “It’s what’s going to happen next and three and four steps down the line.”