Saudis Say They Will Meet Global Demand for More Oil
Monday, June 23, 2008
JIDDAH, Saudi Arabia, June 22 -- Saudi Arabia on Sunday promised to increase oil production as needed while Western countries agreed to improve the transparency and regulation of financial markets, signaling a readiness from oil-producing and oil-consuming nations to make concessions and work together to tackle runaway prices.
"I would like to state that for the remainder of this year Saudi Arabia is prepared and willing to produce additional barrels above and beyond the 9.7 million barrels per day which we plan to produce during the month of July, if demand for such quantities materializes and our customers tell us they are needed," Saudi Oil Minister Ali al-Naimi said at the meeting, attended by officials from more than 30 countries and 25 oil companies.
It was not immediately clear what effect Sunday's emergency meeting, called by the kingdom after oil reached nearly $140 a barrel this month, would have on prices. But analysts said the meeting succeeded in spreading responsibility among consumers and producers for bringing down oil prices, which had sparked riots in Europe and Asia and raised fears of a global recession.
"One result of the meeting is that both sides put all the reasons they believe for the price increases on the table and decided to discuss them, instead of trading accusations and blame," said Abdel Aziz Abu Hamad Aluwaisheg, a Saudi analyst.
Participants also agreed on the need to improve the transparency and regulation of financial markets. Saudi Arabia and other producer nations had blamed the billions of dollars of investments in oil as a hedge against the weakening dollar as a major reason for recent price spikes.
U.S. officials had said that financial markets were only following, not creating, the price hikes and that insufficient oil supplies, partly due to increased demand from booming economies in China and India, were driving prices up. "We see no evidence that financial market participation in the commodity market, the oil market in particular, has led to some systematic bias in energy prices," said Reuben Jeffery III, undersecretary of state for economic affairs.
Saudi Arabia, one of the few countries with sufficient spare capacity, has been under intense pressure from the United States and other oil consumers to increase its crude output to help slow soaring oil prices, which have driven significant increases in the cost of food and other basic goods.
U.S. Energy Secretary Samuel W. Bodman, representing the world's top oil consumer, called again Sunday on Saudi Arabia to increase production, saying it has not kept pace with demand.
Bodman said that world growth of oil consumption has averaged about 1.8 percent annually since 2003 but that for the past three years global production has remained constant at roughly 85 million barrels a day.
Naimi, the Saudi oil minister, rejected that argument and said at the conference Sunday he was convinced that oil markets were well supplied and that production levels were not the primary reason for the dramatic price increases. Global demand over the past year rose by about 1 million barrels a day, he said, while global supplies rose by around 1.5 million barrels.
Analysts said Saudi Arabia was trying to bring prices down because despite the cash windfall, the kingdom, which sits atop the world's largest oil reserves, wants to maintain demand over the long run. "The price volatility hurts everyone because it discourages long-term investment in oil exploration and encourages development of viable alternatives and conservation measures," Aluwaisheg said.
Saudi Arabia and other oil-producing Persian Gulf countries have cited a host of reasons for the price volatility, including pressures affecting major oil-producing countries such as Iran, Iraq and Nigeria. On Sunday, Saudi officials asked that everyone reduce rhetoric to calm prices, a reference to tensions between the United States and Iran. High oil taxes, insufficient refining capacity and the weakening dollar, in which oil is priced, have also been blamed in part for the price hikes.
In a sign of commitment to ease prices, Saudi Aramco on Sunday signed a deal with French energy giant Total to build a refinery in the eastern Saudi city of Jubail with the capacity of refining 400,000 barrels of oil a day.
The kingdom has announced investments of $90 billion over the next four years in oil and gas projects to increase production capacity and improve refining facilities. "We want to tell the world today there is a problem, and we're willing to take our part and our share in solving it," said Abdullah Jumaa, head of Saudi Aramco.
At the summit's final news conference, Naimi said the success is that "we were looking for solutions, instead of blame, and the conclusion is let's work together because there's a real problem that hurts everyone."
Also Sunday, Saudi King Abdullah called for a $1 billion energy initiative to help poor countries combat the rising fuel costs. He also said Saudi Arabia would contribute $500 million to help provide loans to poor countries for development and energy projects.
The Saudis are fearful that bringing too much oil into the market could cause prices to tumble and its economy to suffer, as it did in the 1990s.