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NEW YORK — The past week's sudden surge in oil prices brought to mind the nightmare of shortages, but it is not too likely motorists will be queuing to fill up around the world, analysts say.

All it took was a September 14 strike on key oil infrastructure in Saudi Arabia to abruptly leave the world's main supplier producing just half its normal amount. 

That sent the price of Brent crude flying 15 per cent higher in a single day.

The price on a barrel of crude has come back down since then and by Friday was trading around $65. 

Given the slowdown in the global economy and the abundance of crude produced worldwide, the prospect of a $100 barrel, for now, does not seem to be going to happen.

"In essence, the world is far better equipped to handle oil shocks than it was in the '70s," explained Harry Tchilinguirian, the head of commodity research at BNP Paribas.

In 1973, after an embargo by the Organisation of the Petroleum Exporting Countries (OPEC) against Israel's allies in the midst of the Yom Kippur War, and in 1979, after the Iranian revolution, crude oil prices soared in just a few months, bringing developed economies to their knees.

 Reduced dependence 

"Currently, an oil shock would hardly have the same devastating effects" because countries grew accustomed to such events, economists at Commerzbank said in a note.

On top of that, "central banks would not react to a supply shock with massive interest rate hikes to combat rising inflation", they said.

Most importantly, however, economies have reduced their dependence on oil.

Consumption in the United States, for example, rose from 17.3 million barrels per day (mbd) in 1973 to 20.5mbd in 2018, an increase of only 18 per cent even as the country's real gross domestic product jumped 230 per cent. 

In Germany, households spent only 2.6 per cent of their budget on fuel in 2018.

Many economies have taken strides away from heavy oil consumption, thanks to transport and energy-efficient industries, and alternative sources such as natural gas or renewable energy.

When oil prices held well above $100 a barrel between 2011 and 2014, it did not lead to economic collapse. The world has also now become less dependent on a few huge producers.

The first oil crisis led to the creation in 1974 of the International Energy Agency, which requires OECD countries to keep in reserve the equivalent of at least 90 days of their net imports of crude.

On top of that, oil production has branched far beyond the Middle East, said Tchilinguirian, referring to North Sea oil exploited since the 1980s, deep-sea exploitation off the coast of west Africa and Brazil, and the oil sands of Canada.

The United States, long deeply dependent upon imports, has become a major producer and exporter thanks to shale oil and new technologies.

Such factors help smooth things out in the event of a major disruption like the attack on Saudi facilities.

As such, a country like Saudi Arabia would probably no longer decide to voluntarily suspend its exports "because it could lose its status as a reliable supplier", says Alan Gelder, refined products specialist for Wood Mackenzie.

Even if an oil shock is unlikely, "you can never say there is zero risk", said Andrew Lebow, oil market specialist for Commodity Research Group.

"Especially", he added "if there is a major war that closes the Strait of Hormuz", which a third of all petroleum products shipped by sea pass through.

The effects of a possible oil shock, however, "should not be underestimated", the Commerzbank economists warned. 

"Many economies are currently struggling with problems anyway and the central banks have little room for maneuver [...] to help the affected economies," they said.

WASHINGTON — The former head of the International Monetary Fund (IMF), Christine Lagarde, warned on Thursday that global growth is "fragile" and "under threat" and policymakers should work to reduce manmade vulnerabilities.

Policymakers should work together to "try to reduce the fragility and... resolve the uncertainty", facing the global economy, she told AFP in an interview.

Lagarde, who officially stepped down as IMF managing director last week, decried certain self-inflicted wounds, saying that issues like Brexit and trade frictions "are manmade and can be man-fixed".

But Lagarde, who was the first woman to lead the crisis-lender and is set to become the first woman to take over the leadership of the European Central Bank (ECB) later this year, said, "a bit of woman wouldn't hurt".

Her comments came on the day the OECD said trade tensions are eroding world growth, prompting it to cut its forecast for this year to the slowest rate since the start of the global financial crisis in 2008, just 2.9 per cent down from the 3.2 per cent expansion previously forecast.

President Donald Trump's trade war with Beijing has undermined business investment and exports at a time when China's economy already is shifting to slower growth.

"What we have at the moment is a rather mediocre growth" which is "fragile and it is under threat", Lagarde said.

She said central banks have done much of the heavy lifting, preventing the financial crisis from becoming a depression, but officials handling government policies and purse strings now must step up.

"I think central bankers have done an awful lot and were for many years regarded as the only game in town," she said. 

In her new post leading the ECB, she said she would focus on job creation and stability, but stability alone may not be enough in the lives of real people.

If confirmed, she will step into her new post in an environment where Trump has maintained a relentless campaign against the US Federal Reserve for not cutting interest rates aggressively to stimulate growth.

Trump has also accused outgoing ECB President Mario Draghi of deliberately seeking to weaken the euro to gain unfair trade advantages, something Draghi has refuted.

Others in Europe have criticised Draghi for cutting rates further into negative territory to juice a sluggish EU economy.

But Lagarde said that experience shows that, in cases where politicians meddle with central bank independence, it "doesn't pan out very well".

But she also said central bankers should strive to be "predictable".

"There is enough uncertainty around the world, not to add the uncertainty of what a central banker is going to do."

Central bankers "should deliver on their mandate and", she said, "They should stick to facts and data so that they could be predictable."

OCCUPIED JERUSALEM — Despite last month's receipt from Israel of funds it owed, the Palestinian Authority (PA) still faces a financing gap that could top $1.8 billion, the World Bank said on Thursday.

Palestinian President Mahmud Abbas's PA has been in deep financial crisis since February when Israel froze transfers of VAT and customs duties it collects on the Palestinians' behalf.

His administration had to impose austerity measures, cutting almost half the salaries of its employees.

The cuts hit hard on the Palestinian territories, already suffering unemployment of around 26 per cent in the second quarter of 2019, the bank said in its latest report on the Palestinian economy.

Israel collects around $190 million a month in customs duties levied on goods destined for Palestinian markets that transit through its ports, and it is supposed to transfer the money to the PA.

In February, it decided to deduct around $10 million a month from the revenues — the sum the PA paid inmates in Israeli jails or their families — prompting the Palestinians to refuse to take any funds at all.

Last month, Israel's debt was reduced with the retroactive payment of more than $560 million (506 million euros) in fuel taxes.

But that part-payment of arrears has not fixed the liquidity crisis, the report said.

"The Palestinian Authority faces a financing gap that could exceed $1.8 billion for 2019, driven by declining aid flows and the unresolved transfer of taxes and import duties collect by Israel on behalf of the PA," it wrote.

"The outlook for the Palestinian territories is worrisome," Kanthan Shankar, World Bank country director for the West Bank and Gaza, said in a statement accompanying the report.

"The severe liquidity squeeze has started to affect the PA's ability to fulfill its responsibilities of paying its civil servants and providing public services."

The bank's report will be presented to the international donor group for Palestinians, known as the Ad Hoc Liaison Committee, at its meeting next week in New York.

"If the clearance revenue stand-off is not resolved, the PA would embark on the year 2020 after largely exhausting its domestic sources of financing, including borrowing from domestic banks, which will put it in a much worse position than in 2019," it said.

PARIS — Airbus on Wednesday increased its estimate of the number of new aircraft needed over the coming two decades as airlines seek more fuel-efficient planes even as it trimmed its forecast for the increase in demand for air travel.

In its latest Global Market Forecast for the next 20 years, the European aircraft maker said it expects air traffic to grow by 4.3 per cent annually, a drop from the 4.4 per cent annual growth it forecast last year.

Nevertheless, Airbus now expects even higher demand for new aircraft than it did last year thanks to airlines increasingly retiring older planes for new ones that offer lower operating costs as they consume less fuel.

Airbus anticipates demand for new aircraft over the coming two decades at 39,210 planes, a rise of nearly 2,000 from its forecast last year, due a sharp increase in replacements. Unlike last year, it did not provide a cost estimate.

"Developments in superior fuel efficiency are further driving demand to replace existing less fuel efficient aircraft," said Airbus in a statement.

However, it scaled back the number of planes it expects airlines to acquire to meet growth in demand for air travel by more than 1,500 aircraft to 25,000.

"Economies thrive on air transportation. People and goods want to connect," said Christian Scherer, Airbus Chief Commercial Officer and Head of Airbus International. 

"Globally, commercial aviation stimulates GDP growth and supports 65 million livelihoods, demonstrating the immense benefits our business brings to all societies and global trade," he added.

At a news conference in London, Scherer said air traffic had "more than doubled since 2000" and was likely to continue, fuelled by increased urbanisation, growth of the middle classes, particularly in the Asia, and the liberalisation of the airline sector. 

"Not only are the existing mature markets continuing to grow, but the fundamental huge growth is coming from where the demography of the world sits: Asia, India and the People's Republic of China," he said. Domestic air traffic is expected to increase more than three-fold in China and nearly five-fold in India, Airbus calculates. 

Despite geopolitical uncertainty and the current trade war between China and the United States, which is braking the global economy, "annual growth of 4 per cent shows the resilient nature of the aviation sector," Scherer said. 

"Yes, we are concerned by protectionism, that's obvious. But we hope and do believe it will be of short-lived nature," he said. 

The firm also stressed that with its latest more fuel efficient models it will help the airline industry limit its environmental impact.

"Airbus believes it will largely contribute to the progressive decarbonisation of the air transport industry and the objective of carbon neutral growth from 2020 while connecting more people globally," it said.

The airline industry aims to freeze its carbon footprint at its 2020 level thanks to more fuel efficient aircraft and through offsets like planting trees.

HONG KONG — Oil prices dipped on Tuesday but held most of the previous day’s record gains following an attack on Saudi facilities that wiped out half the country’s output, with traders nervously awaiting the US response after it said Iran was likely to blame.

The crisis revived fears of a conflict in the tinderbox Gulf region and raised questions about the security of crude fields in the world’s top exporter as well as other producers.

It has also taken attention away from the upcoming trade talks between China and the US, as well as a much-anticipated policy meeting of the Federal Reserve (Fed), which is expected to cut interest rates.

Trump said he was ready to help Riyadh following the strikes, but would await a “definitive” determination on who was responsible.

Iran-backed Houthi rebels in Yemen have claimed responsibility, but Washington and Riyadh have pointed the finger at Tehran, which denies the accusations.

Trump appeared to temper his earlier warning that the US was “locked and loaded” to respond, saying: “I’m not looking to get into a new conflict, but sometimes you have to.”

Faint hopes for talks between the US and Iran to ease tensions at the UN General Assembly this month were ruled out by supreme leader Ayatollah Ali Khamenei on Tuesday.

The weekend’s attack sent both main oil prices surging almost 15 per cent on Monday and they managed to hold most of those in early Asian trade with WTI and Brent dipping a little more than one per cent.

Uncertainty and geopolitical fears left Asian equities mixed, having enjoyed an upbeat month thanks to easing trade war tensions and fresh easing measures by global central banks.

Vulnerability 

Hong Kong fell 1.2 per cent with sometimes-violent unrest in the city adding to investor woes and dragging on the economy.

Tokyo ended up 0.1 per cent — marking a ten-day winning run — as investors returned from a long weekend, Shanghai slipped 1.7 per cent, Sydney added 0.3 per cent and Singapore retreated 0.6 per cent.

Taipei, Mumbai and Manila were also lower, though Seoul, Wellington, Bangkok and Jakarta rose slightly.

In early trade London reversed initial losses to rise 0.2 per cent, while Paris was up 0.1 per cent and Frankfurt was flat.

“Geopolitical uncertainty is certainly nothing new in the Middle East. However even by recent standards yesterday’s sharp rise in oil prices... was a historic move,” said Michael Hewson, chief market analyst at CMC Markets UK.

“The size of the move has raised concerns that if sustained, a rise in prices could prompt further weakness in a global economy already vulnerable to concerns about slowing demand.”

But while there are fears of a conflagration in the Middle East, observers said the chances of that were low, with Jeffrey Halley, senior market analyst for the Asia-Pacific at OANDA, saying both sides lacked the appetite for conflict.

He added the most likely outcome would be more severe sanctions on Iran, though he pointed out: “What is clear is that Saudi Arabian oil infrastructure is more vulnerable than thought, and a risk premium will be built into oil prices going forward.”

Analysts said the Fed would probably consider the Saudi attack’s possible impact on the economy and prices when deciding on its next monetary policy move this week, but tipped it to cut borrowing costs after its meeting on Wednesday.

Also providing some optimism was news that Chinese Vice Finance Minister Liao Min will visit the United States on Wednesday to “pave the way” for the higher-level talks planned for next month.

On foreign exchanges the aversion to riskier assets pushed the dollar up against high-yielding currencies, while the pound fought to recover from Monday’s losses.

Sterling dropped Monday after European officials said British Prime Minister Boris Johnson had offered no new, viable ideas to break the Brexit impasse during talks with EU chief Jean-Claude Juncker.

Investors are now awaiting a decision by the UK Supreme Court on whether Johnson’s decision to suspend parliament for more than a month was lawful.

HONG KONG — Oil prices saw a record surge on Monday after attacks on two Saudi facilities slashed output in the world's top exporter by half, fuelling fresh geopolitical fears as US President Donald Trump blamed Iran and raised the possibility of a military strike on the country.

Brent futures surged $12 in the first few minutes of business — the most in dollar terms since they were launched in 1988 and representing a jump of nearly 20 per cent — while WTI jumped more than $8, or 15 per cent.

Both contracts pared the gains as the day wore on but were still up nearly 10 per cent.

The attack — claimed by Tehran-backed Houthi rebels in neighbouring Yemen, where a Saudi-led coalition is bogged down in a five-year war — hit two sites owned by state-run giant Aramco and effectively shut down 6 per cent of the global oil supply.

Trump said on Sunday the US was "locked and loaded" to respond to the attack, but was in talks with Riyadh.

US Secretary of State Mike Pompeo said: "The United States will work with our partners and allies to ensure that energy markets remain well supplied and Iran is held accountable for its aggression."

Tehran denies the accusations but the news revived fears of a conflict in the tinderbox Middle East after a series of attacks on oil tankers earlier this year that were also blamed on Iran.

But The New York Times reported that US officials had satellite images showing the attacks — possibly with drones and cruise missiles — had come from the north or northwest. That indicated they were sourced in the northern Persian Gulf, Iran or Iraq, rather than Yemen.

China on Monday called for the US and Iran to "exercise restraint".

"Tensions in the Middle East are rising quickly, meaning this story will continue to reverberate this week even after the knee-jerk panic in oil markets this morning," said Jeffrey Halley, senior market analyst at OANDA.

Trump authorised the release of US supplies from its Strategic Petroleum Reserve, while Aramco said more than half of the five million barrels of production lost will be restored by tomorrow.

But the strikes raise concerns about the security of supplies from Saudi Arabia and elsewhere.

"The implications of these attacks are far-reaching and lasting, going well beyond the immediate disruption to albeit a very large portion of global output," said Neil Wilson, chief market analyst at Markets.com.

"It is a material escalation in the risks to supply and, in short, traders now worry that Saudi Arabian oil production can be swiftly and easily knocked out."

 Energy firms surge 

Oil prices had dropped last week after news that Trump had fired his anti-Iran hawkish national security adviser John Bolton, which was seen as paving the way for an easing of tensions in the region.

"One thing we can say with confidence is that if part of the reason for last week's fall in oil and improvement in geopolitical risk sentiment was the news of John Bolton's sacking... and thought this was a precursor to some form of rapprochement between Trump and Iran, then it is no longer valid," said Ray Attrill at National Australia Bank.

The surge in crude lit a fire under energy firms, with Hong Kong-listed CNOOC up 7.4 per cent and PetroChina 4.3 per cent higher. Woodside Petroleum rallied more than four per cent in Sydney.

However, airlines took a hit from the prospect of higher fuel costs. Cathay Pacific dropped 4 per cent in Hong Kong, Air China dropped 4.6 per cent in Shanghai and Qantas dived more than four per cent in Sydney.

Asian stock markets were mostly down after last week's rally that was fuelled by China-US trade hopes, while investors are awaiting a key Federal Reserve policy meeting hoping for another cut in interest rates.

Shanghai was marginally lower after data showed China's huge economy showed further signs of slowing last month, with retail sales, fixed-asset investment and industrial production all missing forecasts.

Hong Kong sank 0.8 per cent after fresh violent protests struck the city at the weekend, while Singapore shed 0.1 per cent and Jakarta sank 2 per cent. There were also losses in Mumbai and Wellington. Tokyo was closed for a holiday.

Sydney added 0.1 per cent, Seoul gained 0.6 per cent and Taipei was 0.7 per cent higher.

In early trade, London fell 0.4 per cent, while Frankfurt and Paris shed 0.6 per cent apiece.

On foreign exchanges, higher-yielding currencies dropped as traders shifted to safe-haven units such as the yen and dollar, while gold — a go-to asset in times of uncertainty — rose more than one per cent.

The pound held around seven-week highs owing to easing fears of a no-deal Brexit, with eyes on a meeting between Prime Minister Boris Johnson and European Commission chief Jean-Claude Juncker that was due later in the day.

RIYADH — A drone strike on two major oil facilities in Saudi Arabia has severely disrupted production and drawn allegations that Iran is responsible for what the US has called an “unprecedented attack on the world’s energy supply”.

Here is what we know about the implications of the strike on the Abqaiq plant, the world’s largest oil processing facility, and nearby Khurais, which hosts a massive oil field.

The attack took place as a five-year war rages in Yemen, pitting the Iran-linked Huthi rebels against a Saudi-led military coalition in a conflict that has raised tensions across the region.

Saudi energy infrastructure has been hit by the Houthis many times before, but this strike is of a different order, forcing the state-owned oil giant Aramco to temporarily suspend about half its total output.

However, the full extent of the damage and what weapons were used is not clear. Reporters were not allowed near the plants, where Saudi authorities swiftly beefed up security.

“This is going to focus attention on the Yemen war,” said James Dorsey, a Middle East expert at the S. Rajaratnam School of International Studies in Singapore.

Rather than being “somewhere in the backyard in a remote part of the Gulf”, the war is “starting to involve key assets,” he said.

The Houthi rebels in Yemen claim they sent a swarm of drones far across the border to carry out the strikes, in what would be their most ambitious and devastating attack after dozens of smaller-scale operations.

US Secretary of State Mike Pompeo blamed Tehran for the attack, saying there was no evidence it was launched from Yemen. But he did not explain how Iran was to blame or where the weapons came from.

Iran on Sunday dismissed the accusation as “meaningless”.

The Wall Street Journal cited unnamed sources as saying that Saudi and American officials are investigating the possibility that the strikes involved cruise missiles launched from Iraq or Iran.

The attacks, which have cut six per cent of the world’s oil supply, could drive up prices when markets re-open on Monday, but the impact will depend on how quickly the Organisation of the Petroleum Exporting Countries (OPEC) kingpin can restore production.

Aramco also said it would dip into its stocks to offset the disruption.

The incident could undermine investor confidence in Aramco’s looming stock market debut, a mammoth listing that the government hopes will raise up to $100 billion based on a $2 trillion valuation of the company.

If it does turn out that Tehran carried out the attack, it would pose a major national security headache for Donald Trump and potentially upend a nascent US softening on Iran. 

In June, the US president called off a strike on Iran and he recently said he believes the leadership wants to talk, fanning speculation that he may arrange a summit with his Iranian counterpart at the upcoming UN assembly.

The strikes will also escalate the bitter rivalry between Saudi Arabia and Iran, locked in a decades-old struggle for regional dominance.

Saudi de facto ruler Crown Prince Mohammed Bin Salman has said the kingdom is “willing and able” to respond to this “terrorist aggression”.

But Dorsey says a direct retaliation is unlikely, as “the Saudis do not want an open conflict with Iran”. 

“The Saudis would like others to fight that war, and the others are reluctant,” he said.

If the Houthis are found to be responsible, it would likely set back talks that Washington confirmed earlier this month had been launched in a bid to end the country’s devastating five-year war.

Saudi Arabia has splurged billions on military hardware including advanced fighter jets. But its arsenal has proved ineffective against the Houthis, a ragtag but highly motivated tribal militia that specialises in hit-and-run guerrilla tactics. 

Recent developments have also highlighted the potent threat posed by the Houthis’ steadily advancing weaponry, from ballistic missiles to unmanned drones.

While the kingdom’s oil wells, scattered over a vast geographical area, may be a difficult target, its various oil processing facilities are much more exposed.

The Abqaiq facility is the “most vulnerable” among them, according to the Washington-based Centre for Strategic and International Studies.

Aramco’s vast system of pipelines, pumping stations and ports along the Gulf and Red Sea are also at risk. A drone attack on two oil pumping stations in May forced a days-long shutdown.