Archive for Saturday, May 17, 2008

Bush doesn’t get oil answer he wanted

May 17, 2008


— Saudi Arabia didn't exactly tell President Bush no. But it sure didn't say yes, either.

The response seemed to be "maybe" or maybe "a little" when Bush came calling for help in reducing skyrocketing oil prices. Whatever the answer, it seemed unlikely to lower prices at the pump much - if any - for American consumers. It was a setback for the former Texas oilman who took office predicting he would jawbone oil-producing nations to assist the United States.

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 U.S. 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 U.S. 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."

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 U.S. 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 sagging U.S. 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


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