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You'll get more oil when we say so

Saudi Oil Minister Ali al-Nuaimi speaks during a press conference at the oil ministry on May 16, 2008 in Riyadh.

President Bush speaks with Saudi King Abdullah after walking off Air Force One during the arrival ceremony at King Khaled International Airport in Riyadh on May 16, 2008.

TEXT OF STORY

KAI RYSSDAL: This was the President's second visit to Riyadh this year. And the second time the Saudis have said no when he asked them to open the taps a little wider. The rejection came as crude flirted with $128 a barrel. At the pump, the consumer pain indicator hit $3.78 a gallon.

Not all of that can be laid at the feet of the Saudis, though. This morning Goldman Sachs lifted its estimate for oil prices in the second half of the year -- $141 is their new guess. But when you're sitting on more crude than anybody else on the planet, people pay attention to what you say. And today the Saudis said, sure, they'll boost production -- when their customers demand it.

Jeremy Hobson reports now from Washington.


JEREMY HOBSON: Despite the pomp and circumstance of President Bush's arrival ceremony in Riyadh, Saudi officials continue marching to a different tune.

Here's the Saudi oil minister.

ALI AL-NAIMI: Supply and demand are in balance today. If you look at inventories worldwide, they are also high. So the fundamentals are sound.

That's not a view shared by the Bush administration, which says global demand is soaring. Currently, says Jim Burkhard of Cambridge Energy Research Associates, the world uses about 86 million barrels a day.

JIM BURKHARD: Which is higher than it was a year ago, but it's not an exceptional rate of growth. In fact, it's slightly below the historical trend.

Burkhard says the Saudis see American demand waning as gas prices soar. And they worry demand in China and the Middle East could follow if subsidies disappear. Plus, there's this:

BURKHARD: The Saudis would produce and sell more if there were more refiners around the world that needed the type of oil that Saudi Arabia can offer.

But he says Saudi oil is not ideal for refiners who want to make gasoline. Paul Roberts, author of the book "The End of Oil" says the Saudis would also have to sink billions into infrastructure to produce more oil. Why do that if demand could soon drop?

PAUL ROBERTS: The Saudis look at all this and they say, "You know, at some point, this is going to give. And we don't want to be caught with our pants down. Our $10 billion pants down.

In Washington, I'm Jeremy Hobson for Marketplace.

About the author

Jeremy Hobson is host of Marketplace Morning Report, where he looks at business news from a global perspective to prepare listeners for the day ahead.

President Bush speaks with Saudi King Abdullah after walking off Air Force One during the arrival ceremony at King Khaled International Airport in Riyadh on May 16, 2008.

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