Associated Press, in somewhat of a bushel basket of items, reports that the Saudi government declines to up its oil production significantly, even in response to a request from the President. The Saudis claim that the demand just isn’t there; they’re not being asked by buyers to put more on the market. I’m not quite sure how US demand factors into that, but apparently not enough.
The piece also recaps US agreements with the Saudis to help with their nuclear energy aspirations, as detailed in this State Department release.
Saudis see no reason to raise oil production now
JENNIFER LOVENRIYADH, Saudi Arabia - Saudi Arabia’s leaders made clear Friday they see no reason to increase oil production until customers demand it, apparently rebuffing President Bush amid soaring U.S. gasoline prices.
ADVERTISEMENTIt was Bush’s second personal appeal this year to King Abdullah, head of the monarchy that rules this desert kingdom that is a longtime prime U.S. ally and home to the world’s largest oil reserves. But Saudi officials stuck to their position that they will only pump more oil into the system when asked to by buyers, something they say is not happening now, the president’s national security adviser told reporters.
“Saudi Arabia does not have customers that are making requests for oil that they are not able to satisfy,” Stephen Hadley said on a day when oil prices rose above $127 a barrel, a record high. “What the Saudis wanted to tell us was we’re doing everything we can do … to meet this problem, but it’s a complicated problem.”
The Saudi oil minister, Ali al-Naimi, announced that the kingdom decided on May 10 to raise production by 300,000 barrels at the request of customers, including the United States. He said that increase was sufficient.
“Supply and demand are in balance today,” he told a news conference. “How much does Saudi Arabia need to do to satisfy people who are questioning our oil practices and policies?”
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07:02,
I am not sure increasing production of a commodity that is on the decline and we will probably run out of in a few decades is a good idea. Yes there is a short term impact of the high prices, but I think in the long run we may just learn how to get a long with less energy.
5 years from now we may be able to see most people learn the lesson and replace their SUV’s with more efficient vehicles. Replacement of HVAC’s, appliances, and light bulbs with higher efficiency ones may also start occurring more rapidly. Nothing better than market dynamics to drive improvements. Trying to patch this artificially with a short term solution because we are election year is just going to make things worse.
08:56,
This is what Bush gets for aiding Saudi “peaceful” nuclear efforts.
11:33,
I don’t think this was a matter of give and take or tit-for-tat. Aiding Saudi nuclear aspirations makes sense in its own right.
12:16,
Two questions:
1. How can one argue that oil is not an issue AND
2. Why should Saudi have nuclear aspirations but Iran should have none?
16:26,
Oil is an issue, it’s just not the only issue. And for the KSA, it’s not much of an issue at all.
The difference is that the KSA has a long-standing policy of forswearing the development of nuclear arms. Iran, to the contrary, has made no such promises and keeps saying stuff about ‘annihilating Israel’.
Most of the world would be comfortable with Saudis generating electricity through nuclear reactors. They’re less comfortable with Iran starting a nuclear war.
20:26,
Sparky,
#1) Oil is an issue, but it is a demand issue primarily. The US has not done enough to reduce their use. I think the current situation is healthy to make the right long term adjustments. You also cannot argue against a country like Saudi trying to make decisions for its own interest.
Here is an example that puts this into prospective:
A few weeks ago when the democrats were arguing about the Gas Tax Holiday issue, one of the most hypocritical videos I saw is of Mrs. Clinton riding with a blue collar worker to a gas station. The idea was that gas prices are impacting working class families. The problem is that worker was riding a large pickup truck that was wasting energy. That visual summarizes the problem for me. The consumers got used to wasting energy due to the low prices of the 90’s and the politicians never paid attention to a long term responsible energy policy.
The US needs to adopt policies like Europe, by increasing taxes on gas (a little at a time) and invest in alternative energy. This will create higher prices for gas, which will reduce demand also. Some of the taxes can be used to provide relieve for low income families, but as direct income tax reduction not tied to gas taxes. People will learn, like Europeans did, that is better to own a small 4 cylinders car.
Do not get me wrong, Saudi citizens also need to use gas more efficiently. This can be accomplished by increasing gas prices and may be offer more subsidies on other commodities. Also, Saudi uses too much oil for generating electricity for growing cities and operating declination plants. This brings us to my thought on #2 above
#2 The US by offering Nuclear help to Saudi will allow Saudi to offer more oil to the global markets by reducing domestic oil use. Strategically this also makes sense for the US as it insures control over the technology (i.e. making sure the use is peaceful) and wards off competition which giving American companies some sizable projects. Actually I was surprised that a president that has made a habit of making strategic blunders in the middle east actually made the seemingly right decision on this one.
Regarding Iran’s argument I think John summarizes it better. No one believes Iran does not have ambitions to develop a bomb.
22:25,
Sorry that was desalination plants not declination
00:10,
I see… thank you for both of your explanations…
09:22,
Thank you for the interesting comments.