How will Saudi Aramco attacks affect oil prices in Pakistan?

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The drone attacks earlier this week   on Saudi Arabia’s Aramco, the world’s biggest oil company  , has not only sparked fears of a new conflict in the Middle East, it has also rocked oil markets across the world .

While the exact extent of the damage to the facility remains unknwon, Saudi authorities are scrambling to keep oil production at normal levels to offset push-back of the attacks.

Riyadh and its close ally, the Unite States, has blamed Iran for the attacks. The Islamic Republic, however, denied any role.

Given the fact that Saudi Arabia is one of the largest oil producers in the world, decline in oil supplies would have repercussions on the entire world.

People in Pakistan who have recently seen a surge in oil prices are also concerned about the impacts of the attack on Aramco.

According to BBC Urdu, officials in Pakistan are catious about discussing the issue, but do not rule out the possibility that the situation might affect Pakistan.

A senior official in the petroleum ministry in Islamabad has told BBC Urdu that Pakistan imports most of the oil it needs from the Gulf states, and any disruption in that supply could have dire consequences.

One of the first effects of trouble would be an increase in oil prices in the country. Since the country imports at least 80 per cent of its oil from Saudi Arabia and United Arab Emirates, disruption would hit that supply.

Additionally, if Iran cut off oil supplies from the Strait of Hormuz, it would affect Pakistan more than any other country. Iran is also among the largest oil producers in the world.

The proximity of Saudi Arabia and UAE to Pakistan means that the cost of importing oil from the Gulf is significantly lower for Islamabad than importing from Europe or African countries. However, that could soon change.

In case of a conflict in the Arab world, Pakistan could be forced to look for alternatives to meet energy needs. If that happens, oil prices would be increased dramatically.

A spokesperson for the petroleum ministry is more optimistic about the impact of the Saudi attacks on oil prices in Pakistan. He told BBC Urdu that Saudi Arabia would soon take charge of the situation.

The Oil and Gas Regulatory Authority of Pakistan determines the prices of oil based on a fomrula presented by the government which has not been shared with the public.

“We cannot tell the media anything about oil prices,” an OGRA member said recently. “We increase or decrease prices according to the formula that the government announces.”