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Bush Fails to Win Saudi Help on Gas Prices

by Ter­ence Hunt


RIYADH, Sau­di Ara­bia — Pres­i­dent Bush failed to win the help he sought from Sau­di Ara­bia to relieve sky­rock­et­ing Amer­i­can gas prices Fri­day, a set­back for the for­mer Texas oil­man who took office pre­dict­ing he would jaw­bone oil-pro­duc­ing nations to help the U.S.

Bush got a red-car­pet wel­come to this desert king­dom, home to the world’s largest oil reserves, and promised to ask King Abdul­lah to increase pro­duc­tion to reduce pres­sure on prices, which soared past $127 for the first time Fri­day. But Sau­di offi­cials said they already were meet­ing the needs of their cus­tomers world­wide and there was no need to pump more.

Their answer recalled Bush’s trip to Sau­di Ara­bia in Jan­u­ary when he urged an increase in pro­duc­tion but was rebuffed.

Sau­di oil min­is­ter Ali al-Nai­mi said the king­dom decid­ed on May 10 to increase pro­duc­tion by 300,000 bar­rels a day to help meet U.S. needs after Venezuela and Mex­i­co cut back deliv­er­ies.

“Sup­ply and demand are in bal­ance today,” al-Nai­mi told a news con­fer­ence, bristling at crit­i­cism from the U.S. Con­gress. “How much does Sau­di Ara­bia need to do to sat­is­fy peo­ple who are ques­tion­ing our oil prac­tices and poli­cies?”

Ear­ly this week, Sen­ate Democ­rats intro­duced a res­o­lu­tion to block $1.4 bil­lion in arms sales to Sau­di Ara­bia unless Riyadh agreed to increase its oil pro­duc­tion by 1 mil­lion bar­rels per day.

Sau­di For­eign Min­is­ter Saud al-Faisal said the dis­cus­sion with Bush about oil was friend­ly. “He did­n’t punch any tables or shout at any­body,” the min­is­ter said. “I think he was sat­is­fied.”

That could­n’t be said for at least one of the can­di­dates hop­ing to suc­ceed Bush in Jan­u­ary. Said Demo­c­rat Hillary Rod­ham Clin­ton: “I think it’s very impor­tant that we do some­thing more dra­mat­ic than going to have tea with the Saud­is.”

Nation­al Secu­ri­ty Advis­er Stephen Hadley said con­sumers would not see dra­mat­ic price reduc­tions. Oil experts agreed.

Bernard Pic­chi, an ener­gy ana­lyst at Wall Street Access, an inde­pen­dent research firm, called the 300,000 bar­rel Sau­di pro­duc­tion increase “a token amount.”

It would be dif­fer­ent, he said, if Sau­di Ara­bia boost­ed pro­duc­tion by 1 mil­lion or 1.5 mil­lion bar­rels a day. The announced increase will have Sau­di Ara­bia pump­ing 9.45 mil­lion bar­rels a day by June, Sau­di offi­cials said. That’s about 2 mil­lion bar­rels below its capac­i­ty. Ana­lysts also dis­count­ed the impact of the U.S. Ener­gy Depart­men­t’s announce­ment that it would can­cel ship­ments into the Strate­gic Petro­le­um Reserve for six months begin­ning July 1.

“It’s ridicu­lous because I don’t think this is going to bring the price down,” said Phil Fly­nn, ana­lyst at Alaron Trad­ing Corp., of the Ener­gy Depart­men­t’s move.

Mid­way through a five-day Mideast trip that began in Israel and ends in Egypt, Bush spent the day with Abdul­lah at his week­end retreat out­side the cap­i­tal. It is known as a horse farm since the king main­tains 150 Ara­bi­an stal­lions there. The farm also pro­duces thou­sands of goats and sheep, bred for the king’s roy­al ban­quets.

The sag­ging U.S. econ­o­my and painful gaso­line prices are the top con­cerns of Amer­i­cans in the heart of a heat­ed pres­i­den­tial cam­paign. The run-up in oil prices has been alarm­ing.

Futures prices of crude on the New York Mer­can­tile Exchange have more than dou­bled in the past year, from $62.46 a bar­rel in the first week of May, 2007. Prices reached $100 a bar­rel for the first time in Feb­ru­ary and con­tin­ued ris­ing. They closed at $126.29 Fri­day.

On Jan. 26, 2000, dur­ing a pres­i­den­tial debate, Bush opposed tak­ing oil from the Strate­gic Petro­le­um Reserve and instead said then-Pres­i­dent Clin­ton should “jaw­bone” oil pro­duc­ing nations. That week crude oil prices were $28 a bar­rel.

Hadley said the Saud­is briefed Bush on plans to increase their pro­duc­tion capac­i­ty. They also argued that even an increase would be unlike­ly to bring down the soar­ing prices, which they said were dri­ven more by uncer­tain­ty in the mar­ket, lack of refin­ing capac­i­ty for the type of oil read­i­ly avail­able and oth­er com­pli­cat­ed dynam­ics.

Econ­o­mists say prices are being dri­ven up by increased demand, not slow pro­duc­tion. Chi­na and India are stretch­ing sup­plies as they use ever increas­ing amounts of ener­gy.

Hadley sug­gest­ed the White House was sat­is­fied with — or at least accept­ed — the Sau­di response. How­ev­er, he said the Bush admin­is­tra­tion will see if the expla­na­tion “con­forms to what our experts say.”

Hadley said Bush and the king also focused on Iran and con­cern about recent vio­lence in Lebanon, where Hezbol­lah over­ran Beirut neigh­bor­hoods last week in protest of mea­sures by the U.S.-backed gov­ern­ment. The dis­play of mil­i­tary pow­er by the Shi­ite mil­i­tant group, which the U.S. con­sid­ers a ter­ror­ist orga­ni­za­tion, result­ed in the worst inter­nal fight­ing since the end of Lebanon’s 1975–90 civ­il war.

Sun­ni-dom­i­nat­ed Sau­di Ara­bia — eager to stop any advance of region­al pow­er by Shi­ite-dom­i­nat­ed Iran — joins the West in sup­port­ing Lebanon’s gov­ern­ment. Hadley said Bush and Abdul­lah shared a con­cern that the recent events would “embold­en Iran.” The U.S. and Sau­di Ara­bia, he said, “are of one mind in con­demn­ing what Hezbol­lah did.”

On Thurs­day, Hezbol­lah and the Lebanese gov­ern­ment reached a deal to end the vio­lence after Lebanon’s Cab­i­net reversed mea­sures aimed at the mil­i­tants.

Bush’s vis­it was billed as a cel­e­bra­tion of 75 years of U.S.-Saudi rela­tions, though they have been frayed by Arab per­cep­tions that Wash­ing­ton favors Israel too much in the dis­pute with the Pales­tini­ans, the Iraq war and the Sept. 11, 2001, attacks. The two coun­tries used the occa­sion of Bush’s vis­it to sign new agree­ments.

Among them was an agree­ment for the U.S. to assist the king­dom in devel­op­ing civil­ian nuclear pow­er. Anoth­er involves U.S. promis­es to help pro­tect any Sau­di nuclear infra­struc­ture with train­ing, the exchange of experts “and oth­er sup­port ser­vices as need­ed.” Hadley said it would not involve U.S. troops.

Sau­di For­eign Min­is­ter Saud al-Faisal, at the news con­fer­ence with the oil min­is­ter, said he shared Bush’s hope for a Mideast peace agree­ment by next Jan­u­ary but sharply crit­i­cized Israel for the “human­is­tic suf­fer­ing weighed upon the West Bank and Gaza Strip pop­u­la­tion” of Pales­tini­ans. He said Israel’s “con­tin­ued pol­i­cy of expand­ing set­tle­ments on Pales­tin­ian ter­ri­to­ries” under­mines the peace process.


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