The Wall Street Journal-20080116-Politics -amp- Economics- Bush Conveys Concerns Over Oil Prices to Saudis
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Politics & Economics: Bush Conveys Concerns Over Oil Prices to Saudis
RIYADH, Saudi Arabia -- President Bush complained to Saudi Arabian officials about high oil prices during his visit to the kingdom, saying Western economies could suffer and oil sales could drop if big oil producers don't act to rein in prices.
In a roundtable interview with reporters, Mr. Bush said he was reminding Saudi officials that "if the economy slows down, there will be less barrels of oil purchased." He said he hopes that the Organization of Petroleum Exporting Countries "understands that if they could put more supply on the market, it would be helpful."
The Saudi oil minister later offered little indication that his country, the world's biggest producer, would immediately boost output to give consumers relief, saying world inventories were within normal ranges. But Ali al-Naimi added that Saudi Arabia would tap its reserve production capacity "if the need is there." His comments, along with weak U.S. retail-sales data, appeared to help drive oil prices lower yesterday. Crude-oil futures fell to $91.90 a barrel, an almost-four- week low.
Mr. al-Naimi said at a news conference that "all our effort is to maintain prosperity and growth in all countries, particularly the No. 1 consuming nation in the world." He said other factors are at work in the U.S. economy's stumbles, and analysts "have to be careful to avoid trying to predict what price . . . will cause slowing down."
The oil minister said that while demand is likely to rise in 2008, inventories, which usually are an important factor in determining prices, likely will start to rise in the second quarter, as winter demand eases. He suggested that inventory projections likely will be a factor in production decisions at an OPEC meeting on Feb. 1.
A senior Saudi official explained that Riyadh's goal of a stable oil market is being frustrated by factors that have little to do with production, including market speculation and hedging, a mismatch between refining technologies and the kinds of oil that are being produced, as well as pessimistic assessments of long-term supplies. He estimated those influences are adding $20 to $30 to the cost of a barrel of oil.
Mr. Bush acknowledged that "there is not a lot of excess capacity in the marketplace" because of rising demand, especially in emerging economic giants such as China and India.
The focus on oil came on a crucial day for Mr. Bush's nine-day trip through the Middle East, designed mainly to build momentum for his Palestinian-Israeli peace plan. He also is hoping to strengthen relations with Arab allies who have been concerned over U.S. policy in the region, particularly on Israel and Iraq. Key to the trip's success is Saudi Arabia, the economic and increasingly political leader of the Arab world. Experts say many of the concrete results of the administration's private diplomacy, if they materialize, likely won't be seen for some weeks.
In other developments:
-- The Saudi foreign minister, Prince Saud al-Faisal, offered qualified support for the U.S. peace effort, saying the Israeli- Palestinian conflict has created "breeding grounds for terroristic elements." But the prince said Israel's continued development of settlements in Palestinian territory "casts doubt on the seriousness of the negotiations."
-- Secretary of State Condoleezza Rice made a trip to Baghdad to urge progress in political reconciliation. Saudi officials insisted they are moving ahead with support and recognition for the slowly coalescing Iraqi regime.
-- Mr. Bush said he was telling Arab leaders, who regard Iran's resurgence with some alarm, that "all options are on the table" regarding Iran's nuclear effort, "but I'd like to solve this diplomatically and think we can."
-- The president insisted that despite the pain that U.S. consumers are feeling from high energy prices as well as the housing-related credit crunch, he remains optimistic about the economy's "immediate future."
