Bush fails to win Saudi help for oil increase big enough to cut high gasoline prices

Daily News Egypt
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RIYADH: President Bush failed to win the help he sought from Saudi Arabia to relieve skyrocketing American gas prices Friday, a setback for the former Texas oilman who took office predicting he would jawbone oil-producing nations to help the US.

Bush got a red-carpet welcome to this desert kingdom, home to the world s largest oil reserves, and promised to ask King Abdullah to increase production to reduce pressure on prices, which soared past $127 for the first time Friday. But Saudi officials said they already were meeting the needs of their customers worldwide and there was no need to pump more.

Their answer recalled Bush s trip to Saudi Arabia in January when he urged an increase in production but was rebuffed.

Saudi Oil Minister Ali Al-Naimi said the kingdom decided on May 10 to increase production by 300,000 barrels a day to help meet US needs after Venezuela and Mexico cut back deliveries.

Supply and demand are in balance today, Al-Naimi told a news conference, bristling at criticism from the US Congress. How much does Saudi Arabia need to do to satisfy people who are questioning our oil practices and policies?

Early this week, Senate Democrats introduced a resolution to block $1.4 billion in arms sales to Saudi Arabia unless Riyadh agreed to increase its oil production by 1 million barrels per day.

Saudi Foreign Minister Saud Al-Faisal said the discussion with Bush about oil was friendly. He didn t punch any tables or shout at anybody, the minister said. I think he was satisfied.

That couldn t be said for at least one of the candidates hoping to succeed Bush in January. Said Democrat Hillary Rodham Clinton: I think it s very important that we do something more dramatic than going to have tea with the Saudis.

National Security Adviser Stephen Hadley said consumers would not see dramatic price reductions. Oil experts agreed.

Bernard Picchi, an energy analyst at Wall Street Access, an independent research firm, called the 300,000 barrel Saudi production increase a token amount.

It would be different, he said, if Saudi Arabia boosted production by 1 million or 1.5 million barrels a day. The announced increase will have Saudi Arabia pumping 9.45 million barrels a day by June, Saudi officials said.

That s about 2 million barrels below its capacity. Analysts also discounted the impact of the US Energy Department s announcement that it would cancel shipments into the Strategic Petroleum Reserve for six months beginning July 1.

It s ridiculous because I don t think this is going to bring the price down, said Phil Flynn, analyst at Alaron Trading Corp., of the Energy Department s move.

Midway through a five-day Mideast trip that began in Israel and ends in Egypt, Bush spent the day with Abdullah at his weekend retreat outside the capital. It is known as a horse farm since the king maintains 150 Arabian stallions there. The farm also produces thousands of goats and sheep, bred for the king s royal banquets.

The sagging US economy and painful gasoline prices are the top concerns of Americans in the heart of a heated presidential campaign. The run-up in oil prices has been alarming.

Futures prices of crude on the New York Mercantile Exchange have more than doubled in the past year, from $62.46 a barrel in the first week of May, 2007. Prices reached $100 a barrel for the first time in February and continued rising. They closed at $126.29 Friday.

On Jan. 26, 2000, during a presidential debate, Bush opposed taking oil from the Strategic Petroleum Reserve and instead said then-President Clinton should jawbone oil producing nations. That week crude oil prices were $28 a barrel.

Hadley said the Saudis briefed Bush on plans to increase their production capacity. They also argued that even an increase would be unlikely to bring down the soaring prices, which they said were driven more by uncertainty in the market, lack of refining capacity for the type of oil readily available and other complicated dynamics.

Economists say prices are being driven up by increased demand, not slow production. China and India are stretching supplies as they use ever increasing amounts of energy.

Hadley suggested the White House was satisfied with – or at least accepted – the Saudi response. However, he said the Bush administration will see if the explanation conforms to what our experts say.

Hadley said Bush and the king also focused on Iran and concern about recent violence in Lebanon, where Hezbollah overran Beirut neighborhoods last week in protest of measures by the US-backed government.

Bush s visit was billed as a celebration of 75 years of US-Saudi relations, and the two countries used the occasion of Bush s visit to sign new agreements. Among them was an agreement for the US to assist the kingdom in developing civilian nuclear power. Another involves promises to help protect any Saudi nuclear infrastructure with training, the exchange of experts and other support services as needed. Hadley said it would not involve US troops.

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