IF THE oil markets take the threat of turmoil in Saudi Arabia seriously, then perhaps the price should be even higher.

The Saudi terrorist attacks have produced exactly the circumstances which it is hardest for anyone to weigh up with precision: a small risk of a truly devastating outcome. In this case, that would be the fall of the House of Saud, and the control of the world’s greatest oil reserves passing to Islamic fundamentalists.

To judge by the comments of oil analysts and companies, this is not yet what they are envisaging. Their fears are more modest. They explain the latest jump in the price of US crude to about $41 a barrel since the weekend crisis in terms of the threat of disruption from future terrorism.

Yet perhaps markets should confront the possibility of violent regime change more directly. It is not impossible to foresee a future where the House of Saud presides over a gradual and peaceful evolution of the kingdom. But it is getting harder by the year to assume that the regime can do so — or to judge how the West can help it achieve this.

There is no point denying the West’s dependence on Middle Eastern oil, and on Saudi Arabia in particular, although every now and then energy- efficiency enthusiasts try to argue that the US is weaning itself off oil. It isn’t. America now imports about 60 per cent of the petroleum products it consumes, from crude oil to gas and gasoline. Saudi Arabia supplied just under a fifth of US crude oil imports last year.

Saudi Arabia has a quarter of the world’s proven oil reserves, more than 260 billion barrels, although Aramco, the state oil company, has said it expects to add 150 billion barrels to this total by 2025.

The kingdom produced 11.5 per cent of the world’s crude oil in 2002, according to the independent International Energy Agency. It has been popularly dubbed the “central bank” of the Opec cartel, the only member able to raise production considerably to smooth out the price.

If the world has any spare oil production capacity at the moment — which some oil analysts doubt — then it lies in Saudi Arabia.

How, then, should the markets respond to the threat posed by terrorism in the country? Analysts vary on how much of the current price of US crude of more than $40 a barrel is due to political risk. Calculating a figure is hardly a precise exercise. But the top end of their range is that about a quarter of the current price, or $10 a barrel, reflects this risk.

Of this, perhaps two or three dollars represents risk to disruption of supplies in Nigeria and Venezuela. Perhaps half the rest represents the chance that Iraq, now back to about three quarters of pre-war production levels, will suffer a new serious setback.

The balance — $3 or $4 a barrel — represents the threat of terrorism disrupting Saudi supplies, perhaps by blowing up a pipeline or processing plant.

But if the Saudi threat is serious, shouldn’t the price be even higher? True, the weekend hostage crisis did not affect supplies. The actual production facilities of Aramco are much more closely guarded than the residential compounds which were attacked.

But it is hard to protect miles of desert pipeline, as Iraq has shown. Even a brief hiccup could send the price soaring.

That is all the more the case because the world’s producers are already pumping oil as fast as they can. The markets have been sceptical about the claim of Saudi Arabia itself to be able to step up production to calm the price.

Saudi officials have rejected a recent argument by Michael Simmonds, chairman of a Houston-based boutique investment bank specialising in energy, that they are mismanaging the older fields, extracting oil wastefully. Sadad Husseini, the executive vice-president of Aramco, retorted they were run “like a Swiss watch”.

But they had no answer to one of Mr Simmonds’s main points: that there is very little transparency about Saudi oil figures. The West, hugely dependent on Saudi assertions, has no easy way of checking them and assessing its risk.

Beyond the threat of intermittent attacks lies the nightmare for the West of an overthrow of the House of Saud. If it were replaced by fundamentalists, they might not choose to sell oil to the US in present quantities. Osama bin Laden has said that the sale of Saudi oil to the US at “paltry prices” is “the biggest theft ever witnessed by mankind in the history of the world”.

The rise of terrorism in the kingdom in the past year suggests that militancy may be gaining a foothold among young Saudi men. More than two thirds of the population is under 30; perhaps a third of them are unemployed.

A gloomy outcome is far from inevitable. It is possible that the kind of reform the West has been urging succeeds in easing frustrations and anger at the excesses of the House of Saud. Five years ago, the plan to hold municipal elections this autumn would have been unthinkable, as would the kind of debate on democracy and Arab prospects discernible since the US invasion of Iraq.

But the threats are real. If they become more vivid, oil at $40 a barrel could seem cheap.

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