Robin Pagnamenta, Energy and Environment Editor
We've made some changes
to The Sunday Times
Saudi Arabia has disclosed, during a visit to the Kingdom by George Bush, that it has lifted oil production to its highest in two years.
But the agreement to pump an extra 300,000 barrels per day did little to relieve runaway oil prices, which had earlier struck a record high of nearly $128 a barrel.
The price of a barrel of US crude hit an all-time peak of $127.82 while London Brent rose $2.36 to $124.99.
The announcement from Saudi Arabia, the world's largest producer, to increase supplies by 3.3 per cent to 9.45 million barrels per day came during the second trip made by President Bush this year to visit King Abdullah in Riyadh.
Saudi Oil Minister Ali al-Naimi said: "On May 10, we raised supplies to customers by increasing 300,000 barrels per day of oil (output) ... In the future if the need appears, Saudi Arabia has no objection to producing more."
He said most of the extra supplies would go to the US, the world’s largest oil consumer.
The picture was, however, muddied by warnings from the Kingdom that future rises in production would only come about in response to customer demand.
Naimi also warned the increase would not lead to a significant fall in prices paid at the pump in the US.
News of an increase in Saudi oil production came as the US said it would stop shipments to its strategic oil reserve for the second half of the year after Congress passed a bill calling for a suspension.
The US Energy Department announced it had not signed a six-month contract for deliveries to the US Strategic Petroleum Reserve (SPR), the world’s largest stockpile of government-owned emergency crude oil.
The decision affects up to 13 million barrels of crude.
US officials are concerned about the impact the oil price, which has doubled since last year, is having on the US economy, which is already under pressure from a sliding housing market and the credit crisis.
Oil prices have risen six-fold since 2002 amid booming demand from China and other developing economies, as well as constraints in global production capacity.
Other big producers including Russia and OPEC members Nigeria and Iran are either unwilling or unable to lift production.
While the announcement did prompt a slight easing in the oil price, traders said they were focused on a new price forecast from investment bank Goldman Sachs, which predicted oil prices would average $141 per barrel in the second half of this year because of weak global inventories.
Goldman Sachs is one of the most active investment banks in global energy markets and correctly predicted the current rally as far back as 2005.
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The sad part is the heart of the problem in the US is not supply - it's demand. Americans waste too much. If the US was serious about change, it would jack up the tax on petrol and NG. Making these expensive would make the use judicious. Alternative energy sources would then fill the gap .
Wes Byrd, Iowa City, Iowa, USA
For the consumer this means nothing. It's pure theater - a publicity stunt to make people think that something is being done to alieviate pump prices. No-one bothers to write about the fact that most of the oil that Saudi pumps isn't the type of crude that's refined for petrol. It's pathetic
Robert, Chicago, USA
Its not going to make much difference as they are near full capacity.People need to find ways of using less fuel I think and use alternative forms of energy so that the demand for oil will be reduced.
stephen hulton, eure, france
Larry Pewsey:
Reserves in Alaska aren't "massive"--they'd provide 1% of current US consumption (after a 10-year effort).
Florida voted AGAINST more oil rigs-- its the will of the people.
None of these reserves were economically viable UNTIL the price of oil sextupled.
S Waugh, Jersey City , USA
What Larry Pewsey fails to acknowledg is that for 6 of Clinton's 8 years the GOP controlled House and Senate and blocked energy efficiency legislation ( e.g. CAFE). Inflation Adjust Oil Price 92-96 peaked at $30 per bbl, and peaked at $36 in '00.
Compare that to the last 4 years of Bush..
S Waugh, Jersey City , USA
re: Stephen's mention of mass transport systems---. NY, Chicago, San Francisco and D.C have them but hardly anyone else. The 'national' passenger rail system here is pathetic, true also for buses. For many americans the "alternative" is simply more economical cars for the near future.
S Waugh, Jersey City , USA
Larry: The US has massive reserves in Alaska, California & Florida, yet the US will not drill in those locations. WHY?
Because the US would rather use up other peoples resources and keep theirs for a rainy day!
T.Andre, London,
every other paper and new channel is saying "saudi king snubs bush"
why at the times is it diffrent?
scott m, leeds, uk
price of oil to high?.,stop the speculators. if they are betting that the price of oil will go up, up it will go. someone suggested that speculators have, at the present time, increased the price of oil by some 40%. devolop mass transport systems and stop building gas guzzling cars.s
stephen baron, leith, tasmania
What Martin fails to acknowledge is that for 8 years the Clinton administration did absolutley nothing to develop a national energy policy. 8 Years and no policy.
The US has massive reserves in Alaska, California & Florida, yet the US will not drill in those locations. WHY?
Larry, Pewsey, England
I think Martin of Chicago's idea of a coherent energy policy is the kind of incoherent lunacy which passes for an energy policy on this side of the Atlantic. An incoherent lunacy which impoverishes millions of ordinary people by throwing their money down the drain by the billion.
Martin, Welwyn Garden City, England
If the US taxed petrol at European levels, consumption of oil by the US would fall dramatically overnight, with a knock on effect on prices. While not politically popular, it will have to happen one day ....
Paulus, London , UK
Bush's domestic & foreign policy is a major factor in jacking up oil prices. At home he has induced farmers to produce crops for Bio-fuel instead of foodcrops, resulting in ever spiralling food prices. Overseas he creates fear of more wars in the Middle East with Iran which again jacks up oil prices
Adam, Shipley, West Yorkshire
Martin in Chicago is wrong. Global leaders should focus on two problems;
1. more refineries. Supply reliability.
2. Alternative energy sources with more invention and ingenuity. EVERYTHING holds energy. The trick - how to extract it.
Leigh Vernier, Riyadh, Saudi Arabia
Wow, here in the U.S., we were told the answer was "no" from Saudi Arabia. Apparently, there are two stories out there. I wonder which one is true. This is scary.
Tina, Los Angeles, USA
What a hopeless and idiotic way to solve our nation's energy crisis Like asking foxes to guard the hen house. Perhaps when the Republicans are swept from office this fall we can finally start to work on a coherent national energy policy.
Martin, Chicago, USA
Saudi Arabia increased production for the US to make up for a reduction of supplies from Mexico and Venezuela. There is no net increase. Your headline is thoroughly misleading as is the claim that the announced "increase" occurred during Bush's trip.
S Waugh, Jersey City,
No mention of the impact of the Iraq Invasion and occupation on global oil trade and the speculation that has caused? Or 6 years of gas-guzzling SUV's, tthe US refusal to modernize power plants or the weak US dollar, due to stupid tax cuts and borrowing for Iraq. This is "analysis" ? 'D"-Fail.
S Waugh, Jersey City,