Saudi Arabia is the world's largest crude oil producer, has its greatest oil reserves and is the principal state capable of increasing production to meet international demand. The weekend attacks by gunmen on an expatriate housing compound in Khobar, in which at least 22 people were killed, are intended to terrorise the 35,000 foreigners working in Saudi Arabia's oil industry.
The organisation responsible wants to overthrow the country's ruling royal families, whom they accuse of providing the United States "with oil at their master's wish, so their economy does not collapse".
Strategically and economically Saudi Arabia is more important than Iran or Iraq. These attacks raise the question of how vulnerable the ruling regime there is and what the consequences for the rest of the world would be if it is undermined. The question is inseparable from the wider issue of peace and stability in the Middle East - especially between Israel and the Palestinians and the future of Iraq. The political inter-connectedness of these issues is starkly revealed by these latest atrocities, as are their potentially dangerous economic consequences.
International demand for oil is relatively buoyant, while supply is tight. Political uncertainty combined with speculative activity could well drive oil prices up today when major markets open after a holiday weekend. Attention will focus on Thursday's meeting of OPEC. It wants to increase supply in order to prevent a further oil price spiral, given that the price is already at a 21-year peak of $41.85 a barrel. A prolonged price increase of this magnitude would pose severe problems of adjustment for the world economy. In the longer term it would force all concerned to find alternative and more efficient sources of energy. But a short-term price run would be gravely damaging.
Saudi leaders say they are determined to destroy the Islamic fundamentalist organisations responsible for the series of attacks on such targets over the last year and are capable of providing a continuing reliable supply of oil. But quite aside from these extremist groups, there are many sources of instability and popular dissatisfaction in the desert kingdom.
It is ruled by an archaic system of interlocking families which no longer have the resources to meet growing demands for employment and political reform from a more and more sophisticated population. The rulers are divided between reformist and repressive wings. A prolonged Islamist insurgency combined with rising political conflict opens up a prospect of indefinite uncertainty.
President Bush has called for democratic change in the Middle East harnessed to a democratic transformation in Iraq. But the actual policies he has followed have weakened the potential agents who could deliver such an objective and intensified the Israeli-Palestinian conflict. Saudi Arabia is now joining this dangerous cocktail of regional instability that endangers the rest of the world.