One on One with Ali Al-Naimi, Oil Minister of Saudi Arabia
Friday, September 25, 2009
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SUSIE GHARIB: I'm just back from Saudi Arabia where I met with Ali Al-Naimi, the nation's oil minister. As the dominant member of OPEC, he plays a crucial role in deciding what consumers and businesses pay for energy. This week, Naimi hosted 3,500 business leaders and heads of state for the opening of a multi-billion dollar university, the King Abdullah University of Science and Technology, or KAUST, for short. Naimi guided its development and is its chairman. I began our conversation by asking Naimi how KAUST will impact the Saudi economy.
ALI AL-NAIMI, OIL MINISTER, SAUDI ARABIA: You know that Saudi Arabia today is highly dependent on one source of revenue from hydrocarbons -- production, processing and sale of oil and gas. Now, we cannot continue forever on this source of income. So the whole purpose is, let us do our best to diversify the economy, industrialize and move to a knowledge society eventually.
GHARIB: But Mr. Naimi, what are you going to focus on? What will be the biggest growth industry outside of oil, ultimately?
AL-NAIMI: Number one is food. Number two is water. Number three believe it or not, is energy and environment. These are the 3 areas of focus. Now why do I say energy? It's a different energy. It's solar energy.
GHARIB: Let's talk a little bit about oil. We've seen oil prices this year as low as 32 dollars and not long ago, as high as 147 dollars. What do you think is the right price for oil?
AL-NAIMI: We believe that around 75 dollars is a fair price for both producer and consumer. And why do I say 75? Now to produce some of the hydrocarbon sources, it requires a price which rewards the investor. Some of these investments need a price between 60 and 80 and that's why we chose a fair price of around 75 dollars.
GHARIB: Some people would say that 75 dollars is not the optimal price because the dollar is so week and so to compensate for that, the price should actually be higher. What do you say to that?
AL-NAIMI: Of course there is some truth to that. Actually in Saudi Arabia, it doesn't make any difference because our riyal and the dollar are tied together so it doesn’t make much difference.
GHARIB: Do you see prices going below $70?
AL-NAIMI: If I knew that, I wouldn't be here. I would be gambling in Las Vegas. I can tell you one thing - the price will vacillate and keep changing.
GHARIB: Will it make another run for a $140 level? Do you see that happening?
AL-NAIMI: Anything is possible. We will do our best to avoid that. Because I don't believe high prices are good nor too low prices. We need a price which allows the investor to invest and the producer to produce. And we believe $75 and if you want a range between $70 and $80.
GHARIB: As you know the U.S. economy depends on consumer spending and one of the biggest factors for consumers to spend is what they pay for the price of gasoline...what can you tell American consumers of what they can expect to pay for gasoline?
AL-NAIMI: Pay less taxes! You know, if you took the price of a gallon of gasoline and looked at what contributes to that price...in the U.S. it is probably between 30 and 33% which is not big, but worldwide you will find it ranging between 60 and 80% so the biggest chunk of the price of gasoline is really taxes.
GHARIB: But when gasoline prices not long ago jumped from $2 a gallon to $4 that wasn't because of government taxes, that was because the actual price jumped.
AL-NAIMI: Right...restrain speculators. Restrain financial institutions from playing around with the price of oil.
GHARIB: And how do you do that?
AL-NAIMI: By legislation. And I believe the subject today of trying to manage this speculation is being discussed very loudly and thoroughly in many organizations in many government institutions.
GHARIB: Minister Naimi... you have a reputation for trying to keep oil prices stable, but there are other OPEC countries that are not committed to that, what do you say to them?
AL-NAIMI: Moderation is the name of the game. That's Saudi Arabia’s motto and we always strive to be reasonable and moderate in everything we do actually. And so if I am at an OPEC conference we will have of course have differences of opinion, but eventually moderation becomes the subject of the day.
GHARIB: A big question for everyone right now... is the recession over? What do you think?
AL-NAIMI: I wish I knew the answer but because I am an optimist, I believe, based on what we have seen in the recovery of price and how it is reacting to economic growth, I believe we are on the road to economic recovery.
GHARIB: What signs are you seeing?
AL-NAIMI: Well I see it in demand for energy, I see it reflected in the price so it's there and it's happening.
GHARIB: You have an OPEC meeting coming up in December. Do you see anything going on in the markets that would call for a change in policy?
AL-NAIMI: Right now, I don't believe so. I think we will be as we are today.
GHARIB: You can watch the entire interview with Minister Naimi on our web site, NIGHTLY BUSINESS REPORT on pbs.org. And then on Monday, we'll bring you my interview with the CEO of Saudi Aramco, the biggest oil company in the world.
