Saudi Arabia sought to calm turbulent oil markets yesterday by offering to boost production, but after an initial drop in prices the cost of oil rose again by day's end.
The Saudis' failed attempt to jawbone prices lower suggests to many industry specialists that current conditions -- production at near capacity, surging demand and fears of terrorism -- are curtailing the long-established power of the kingdom in international markets.
Prince Bandar bin Sultan didn't say the Saudis would "fine tune" prices before the election, an adviser said.
"In a sense, it's a perfect storm," said Fareed Mohamedi, chief economist for PFC Energy, a District-based consulting firm. "Many factors have just all come together and pushed the Saudi ability to the wall."
Rising oil prices have become an issue in President Bush's reelection. The U.S. Federal Reserve on Tuesday blamed the run-up in oil prices for the recent sharp slowdown in the economy.
Democratic presidential candidate John F. Kerry has raised concern that U.S. dependence on oil from Saudi Arabia, the world's largest exporter, leaves the United States vulnerable. At last month's Democratic convention, Kerry drew sustained applause when he declared, "I want an America that relies on its ingenuity and innovation, not the Saudi royal family."
The question of the Saudis' sway in world oil markets has assumed a role in the U.S. presidential election this year. Author and Washington Post assistant managing editor Bob Woodward stirred a political controversy several months ago when he reported in a book that the Saudi ambassador to the United States, Prince Bandar bin Sultan, told Bush that the Saudis would "fine tune" oil prices to boost the U.S. economy before the presidential election.
Adel Jubeir, foreign affairs adviser to the Saudi crown prince, said in a conference call with reporters that yesterday's announcement was not intended to influence the political campaign. He dismissed the assertions in Woodward's book as "fiction."
"Our policy is to maintain prices at a moderate level," he said.
Saudi officials said the pledge of increased production was motivated by concerns that oil prices were too high and could depress the world economy and lead to a decline in demand.
White House spokesman Trent Duffy would not discuss the Saudi announcement, saying only that the administration works with oil-producing countries to ensure adequate oil supplies.