Could OPEC+ Issue an Oil Embargo on Israel?

Could OPEC+ issue an oil embargo or other sanctions on Israel?

Technically they could, but the group operates by consensus so they would have to hold a meeting and everyone would have to agree to it. That’s what Ellen R. Wald, the President of Transversal Consulting and author of Saudi, Inc., told Rigzone, adding that this is “extremely unlikely”.

“Even the 1973 oil embargo was not an OPEC decision, it was an OAPEC decision and it wasn’t even fully adhered to - Saudi Arabia secretly supplied the American navy with oil during the embargo,” Wald said.

The Transversal Consulting President highlighted that Israel has traditionally gotten most of its oil from Azerbaijan, Kazakhstan, and Northern Iraq via Turkey, but noted that the Iraqi oil has not been flowing for most of 2023 due to issues between the Kurdistan Regional Government and the Iraqi government. Wald also pointed out that Israel recently purchased oil from Gabon and Nigeria.

“Although these countries are members of OPEC or the larger OPEC+ group, they would be hard pressed to halt sales to Israel,” Wald said.

“Even if OPEC and OPEC+ embargoes oil to Israel, non-OPEC+ sources like the United States or Brazil could easily fill the gap. It would just take a little longer for the tankers to reach Israel,” Wald added.

“It would be a foolhardy move that wouldn’t change anything and would send a message to the rest of the world that OPEC+ producers are not stable sources of oil, which is exactly the message they don’t want to send,” Wald continued.

Wald also outlined to Rigzone that an OPEC+ oil embargo or other sanctions on Israel would mean “very little in a technical sense” for global oil markets, “because Israel isn’t such a large consumer that it would be difficult to get oil to Israel from other sources”.

“Prices wouldn’t change much, overall,” Wald noted.

Looking at how oil embargoes have affected the oil market in the past, Wald outlined that in 1973, when Arab OPEC countries embargoed oil sales to the United States and its allies (Europe and Japan), it caused a “huge jump” in the price of oil and “major oil shortages in the United States because U.S. consumers were dependent on oil from the Middle East”.

“This is not the situation right now,” Wald said.

When asked if OPEC+ could issue an oil embargo or other sanctions on Israel, Carole Nakhle, the CEO of consultancy Crystol Energy, told Rigzone, “using oil as a political weapon is of course a card OPEC+ can play and one of its members, Iran, has openly called for it”.

“However, for a global oil embargo this is not the 1970s anymore. Not only market conditions have changed drastically but the circumstances of its individual countries and their alliances have changed. For a targeted boycott of Israel, the latter will find alternatives,” Nakhle added.

Examining the effect of oil embargoes in the past, Nakhle said the immediate reaction was higher prices, but outlined that, with time, those higher prices, “and the quest of importing nations to diversify their sources of supplies, thereby reducing their vulnerability to such embargoes”, saw new suppliers emerge.

“Think of the North Sea or Alaska, for instance,” Nakhle told Rigzone.

Offering his view on whether or not OPEC+ could issue an oil embargo or other sanctions on Israel, Matthew Bey, a Senior Analyst at RANE, told Rigzone, “it is highly unlikely that OPEC+ would back an embargo against Israel as it would almost certainly lead to quick U.S. retaliation, such as throwing more supporting behind NOPEC legislation”.

“In fact, an OPEC delegate has already played down concerns it could happen,” Bey added.

In his response to Rigzone, the RANE analyst highlighted that Iran is calling for a boycott by Islamic countries, not OPEC more broadly, and noted that Israel’s top five oil producers are not from the Arab world.

Looking at the effect of oil embargoes, Bey stated that they can drive up prices if they are enforced, “as we saw in the 1970s”, but added that any embargo against Israel would be small in comparison.

To contact the author, email andreas.exarheas@rigzone.com