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Saudi Arabia May Boost Oil Output

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The Associated Press

Published: June 23, 2008

JIDDAH, Saudi Arabia - Facing strong U.S. pressure and global dismay over oil prices, Saudi Arabia said Sunday it will produce more crude this year if the market needs it. But the vague pledge fell far short of U.S. hopes for a specific increase and may do little to lower prices immediately.

The current "oil shock" leaves Western countries with little choice but to move to nuclear power and change energy-consumption habits, Britain's prime minister said at a rare meeting of oil-producing and consuming nations.

Saudi Arabia, the world's top crude exporter, called the meeting Sunday to send a message that it is concerned by high oil prices inflicting economic pain worldwide.

Instead, the meeting highlighted a sharp disagreement between producers, such as Saudi Arabia, and consuming countries, such as Britain and the United States, over core factors driving steep price increases. Oil closed near $135 a barrel on Friday - almost double the price a year ago.

The cost of gasoline has become a sore point in the U.S. presidential race. President Bush and presumed Republican nominee Sen. John McCain of Arizona called on Congress to lift its long-standing ban on offshore oil and gas drilling. Illinois Sen. Barack Obama, presumptive Democratic nominee, has said such moves will do nothing to ease consumers' short-term pain.

The United States and other nations say oil production has not kept up with increasing demand, especially from China, India and the Middle East. But Saudi Arabia and other OPEC countries say there is no shortage of oil and blame financial speculation and the falling U.S. dollar.

Saudi Oil Minister Ali al-Naimi said the kingdom is willing to produce more than the 9.7 million barrels of oil a day it planned to produce in July - if the market requires it.

But he also blamed speculators and said supply is not the problem. "In today's environment, I am convinced that supply and demand balances and crude oil production levels are not the primary drivers of the current market situation."

King Abdullah said Saudi Arabia is not the culprit. He said factors driving "the unjustified, swift rise in oil prices" include "speculators who play the market out of selfish interests," higher consumption by developing countries and higher taxes in some countries.

U.S. Energy Secretary Samuel Bodman has said U.S. officials found no evidence speculators are driving up prices.

The kingdom said it would supply enough oil to the market. It announced a 300,000 barrel per day boost in May and said before the meeting it would add 200,000 barrels per day in July, raising daily output to 9.7 million barrels.

The increase is "going to help a little bit, maybe reduce prices just a little. It won't be significant," New Mexico Gov. Bill Richardson, President Clinton's energy secretary, told CNN's "Late Edition."

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