Saudi Pipeline Shutdown Threatens Global Oil Supply and Gas Prices

The East-West pipeline in Saudi Arabia, which transports around 4 million barrels of oil per day, has been shut down due to Houthi strikes. This pipeline is a crucial workaround for the Strait of Hormuz, which has been intermittently disrupted for months. The outage is particularly devastating as global oil supply was already under strain, with Saudi crude production having fallen to 6.2 million barrels per day in August.

The loss of this pipeline will have far-reaching consequences, including higher gas prices and potential shortages. Brent settled at $109.51 a barrel on September 9, up from $87.77 on August 26, while West Texas Intermediate finished the same session at $97.26. The International Energy Agency projects global oil supply will drop by 5.7 million barrels per day, about 6%, for the year.

The impact of this outage is already being felt at the pump, with American drivers paying $4.31 per gallon for regular gasoline as of September 13. If the pipeline remains down through October and crude retests the $138 April peak, gas prices could surge even higher.