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Oil Tops $127 but Saudi Arabia Declines to Increase Production

BY Admin  May 16, 2008 at 2:45 PM EDT

President Bush and King Abdullah

“The Saudi government has reiterated their policy that Saudi Arabia is willing to put on the oil market whatever oil is necessary to meet the demand of Saudi Arabia’s customers,” said Bush’s National Security Adviser Stephen Hadley.

Bush made the plea as U.S. motorists suffer rapidly rising prices at the pump, soaring to a record average of $3.787 for a gallon of regular gas, according to AAA’s Daily Fuel Gauge Report. The average a year ago was $3.114. Bush made a similar unsuccessful appeal to Saudi Arabia’s King Abdullah in January.

Saudi Arabia is the world’s largest oil producer and a member of OPEC, the Organization of the Oil Exporting Countries, which controls more than 40 percent of the world’s crude oil supply. Saudi Arabia’s oil minister Ali al-Naimi said in South Korea on Thursday that the record oil prices are a result of turmoil in financial markets, not from a shortage in supply.

On Friday, al-Naimi told Bush that, “that policy, or even an increase in production is not going to result in some dramatic reduction in prices in the United States”.

Later in the day when addressing reporters, al-Naimi said “any demand for extra production capacity from consumers will be immediately met.”

 

In its monthly report released on Thursday, OPEC found slower oil demand growth than it previously anticipated with global demand averaging nearly 87 million barrels per day, a 1.35 percent increase over last year. Officials estimated 1.4 percent growth.

Earlier this week, the U.S. Congress passed legislation to block President Bush from adding more oil into the Strategic Petroleum Reserve until the price falls below $75 a gallon. The Department of Energy said Friday that it would cancel planned oil shipments to the reserve beginning in July and would not sign contracts with oil companies for up to 13 million barrels of crude oil. As of May 16, the reserve held 702.7 million barrels, according to the department’s Web site.