By Michael A. Fletcher
Washington Post Staff Writer
Monday, April 25, 2005; 8:24 PM

CRAWFORD, TEXAS, April 25 -- President Bush and Saudi Crown Prince Abdullah emerged from their meeting here today with no agreement that would lower gasoline prices in the near term, although Saudi Arabia reiterated plans to increase oil production capacity in coming years in an effort to meet fast-growing world demand.

Prince Abdullah and his delegation responded to Bush's public calls in recent weeks for the Saudis to increase crude oil production to help lower gasoline prices, by explaining their long-term strategy to invest $50 billion over five years in a plan that would eventually increase the kingdom's oil production capacity by close to 50 percent.

"Clearly, the news that came out of the meeting today ought to be good news for the markets and we would hope that and other factors would result in some positive news in terms of the price fronts," said National Security Adviser Stephen J. Hadley. "But as you know, these markets are complicated business."

The meeting at Bush's ranch came amid increasing concern about spiraling gasoline prices, which is helping to push the president's approval ratings to new lows. It also came as Saudi officials are seeking to further repair their relationship with the United States, which was badly damaged following the Sept. 11, 2001 terrorist attacks, where 15 of the 19 suspected terrorists were Saudi citizens.

Crude prices have been rising because increasing demand, particularly in the exploding economies of China and India, has pushed the world's ability to produce oil to its limits.

In previous years, Saudi Arabia, home to about a quarter of the world's oil reserves, had enough spare capacity to increase production significantly when demand spiked. But now, the Saudis have little additional capacity, making oil markets jittery. Markets are concerned that a terrorist attack or other significant supply disruption could result in a shortage because of that lack of ability to make up for lost production.

The price of crude oil has hovered around $55 a barrel in recent weeks, more than double the price two years ago. Gasoline, meanwhile, averages $2.22 a gallon, and some analysts predict that it will go higher in the summer.

"There is no shortage of crude oil," said Adel Aljubeir, foreign affairs advisor to Prince Abdullah. " . . . It would not make a difference if we put an extra 1.5 to 2 million barrels of oil on the market."

The price hikes, he said, are a result of a confluence of factors, including: increased demand, limited refinery capacity, a lack of spare production capacity and the fear permeating the market because of the ongoing violence in Iraq. Some oil policy experts agreed there is relatively little Saudi Arabia can do in the short run to lower oil prices. The country is producing about 9.5 million barrels of oil a day -- close to its nearly 11 million-barrel capacity.

"They are scared to death about the effect of long-term high prices," said John E. Long, a Saudi specialist and a former diplomat, explaining that high prices increase incentive for investments in alternative forms of energy, ultimately curbing demand for crude oil.

"The crown prince understands that it's very important . . . to make sure the price is reasonable," Bush said to reporters before the meeting. "A high oil price will damage markets, and he knows that."

Bush also made another plea for passage of his energy bill, which was first proposed in 2001 and received the approval of the House last week. Some supporters of the measure said that if it had been approved several years ago, oil prices would not be at their current level. But opponents dispute that, saying the legislation will do nothing to bring down prices. Bush acknowledged last week that his national energy policy would not lower gasoline prices anytime soon.

The atmosphere surrounding the meeting between Bush and Abdullah was free of much of the tension that surrounded their last session here, which took place just seven months after the Sept. 11 terrorist attacks.

Bush greeted Abdullah with a warm handshake and traditional air kisses on both cheeks, before slowly leading the 81-year-old Saudi leader up a walkway lined with Texas bluebonnets and into the meeting in an office at his ranch.

After the session, which included lunch and the two countries issued a joint statement in which they pledged continued cooperation in the war on terrorism, promised to work together toward a peaceful settlement between the Palestinians and Israel and voiced support for the Syrian withdrawal from Lebanon. The statement also praised the steps being taken toward democratic reforms in Saudi Arabia and announced the formation of a joint committee, to be headed by the U.S. secretary of state and the Saudi foreign minister, aimed at increasing the number of educational, business and cultural exchanges between the two nations. The agreement also cited the appreciation of the U.S. for the Saudi pledge to increase oil production.

"The fact is that we have in the international economy growth, we have new consumers -- large-scale consumers coming on," Secretary of State Condoleezza Rice told reporters. "What the president is trying to do is make sure we have a long-term sustainable answer to this."

Staff Writer Justin Blum contributed to this report.