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Saudis try to calm oil prices for americans Original Source Link: (May no longer be active)
http://www.usatoday.com/money/industries/energy/2004-08-11-saudi-oil_x.htmhttp://www.usatoday.com/money/industries/energy/2004-08-11-saudi-oil_x.htm
Saudis try to calm prices, deny politics involved
By Barbara Hagenbaugh, USA TODAY
WASHINGTON — Saudi Arabian officials Wednesday sought to stem a sharp run-up in oil prices, announcing they can increase production 14% if necessary.
But their efforts did little to calm jittery oil markets, with prices sticking near record highs.
Saudi Arabia, the world's largest oil producer, can pump another 1.3 million barrels a day and keep that up "indefinitely," Adel Al-Jubeir, foreign affairs adviser to the Saudi crown prince, told U.S. reporters. The Saudis are now pumping about 9.3 million barrels a day, up 1 million from earlier this year.
"We have the capacity and are ready to tap into it immediately," Al-Jubeir said. He called current prices "absolutely not justified" and said clients have not suggested they are looking to buy more oil.
"There is no shortage," he said.
Wachovia economist Jason Shenker calls the Saudi announcement "a lot of smoke and mirrors," an opinion that was reflected in the markets.
Oil prices seesawed following the announcement as investors focused on U.S. government data released earlier in the day showing a decline in oil inventories. The price of a barrel of crude oil closed at $44.80, 28 cents above the previous day's close and just shy of the record of $44.84 hit Monday.
"The market is really nervous," says Rick Mueller, senior oil analyst at Energy Security Analysis. He believes prices are headed lower.
But Mark Baxter, director of the Maguire Energy Institute at Southern Methodist University, says the amount of spare capacity around the world is so small that anything — a pipeline breaking, a terrorist attack or even a tropical storm — could knock supply and demand out of whack.
"I don't know what kind of upper limit to put on" oil price predictions, he says.
There were questions Tuesday about whether politics were involved in the Saudi announcement. Earlier this year, author Bob Woodward said on CBS' 60 Minutes that the Saudis had pledged to help reduce oil prices ahead of the election to help President Bush, whose family has personal and professional ties to Saudi officials.
But the Saudis denied the announcement was political.
"We'd like to keep prices at moderate levels. This has been our policy irrespective of who is in the White House," Al-Jubeir said.
The announcement came a day after the Federal Reserve said high oil prices were one of the main culprits for a recent slowing in the U.S. economy. While the Fed remained optimistic the softening was temporary, some private-sector economists have been asking what will happen if oil prices stay high.
"Oil prices remain (arguably) the single biggest threat to the global recovery," wrote Nariman Behravesh, chief economist at Global Insight, in a new report. Behravesh, however, notes the USA is much less dependent on energy than in prior price spikes and that adjusted for inflation, oil prices are below levels seen in the mid-1970s and early 1980s.
Contributing: James Cox
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