WASHINGTON – Saudi Arabia's oil minister said Tuesday that currently high crude oil prices are of no long-term benefit to either producers or consumers and contribute to market instability.
"Energy security cannot be sustained when prices are extreme — too high or too low," Saudi Oil Minister Ali al-Naimi said in remarks to an energy conference.
He said Saudi Arabia is committed to working with the United States to keep oil markets stable, including plans to increase production to 12.5 million barrels a day by 2009. But he said that producing adequate supplies must involve other suppliers and conservation.
Oil prices went above $74 a barrel Tuesday, flirting with their record high of just above $75 reached last month.
Al-Naimi, who was joined in a panel discussion by Energy Secretary Samuel Bodman, sought to dispel the notion that U.S. energy independence could drive down prices, although he did not specifically refer to the phrase frequently use by the Bush administration and members of Congress as an answer to America's energy problems.
It is "a myth" that countries can lower prices by reducing their oil imports or that they can achieve greater energy security by blocking imports from a region of the world, said al-Naimi. He said oil is traded on the global markets, and even if a country has no imports it will cost whatever the international market dictates.
President Bush in his State of the Union Address pledged to increase development of alternative fuels with a goal of reducing U.S. oil imports from the Middle East by 75 percent. Bodman reiterated that goal.
During a question-and-answer period, the Saudi official was asked if he viewed that as unwise protectionism. "I don't call it anything," he replied.
But in his speech, al-Naimi cautioned against a country "backsliding into protectionism" by seeking to block imports from any region.
"Not only is a country worse off when it builds walls around itself and slips into protectionism, but the global system as a whole suffers," he said.
Bodman said the United States views Saudi Arabia as a leading ally not only in the war against terrorism, but also in efforts to stabilize global oil prices. He noted that Saudi Arabia, which produces about 9 million barrels a day, is the only producer with significant spare production capacity and the United States has the largest emergency government oil reserve.
Both officials agreed there are adequate oil supplies.
Bodman said the market is worried about a supply disruption — in part because of the standoff with Iran over nuclear issues and the war in Iraq — and "there's no doubt a (fear) premium" is reflected in today's prices.
"Political tensions, tight petroleum product market, and talk of the world running out of oil are fostering an environmental of fear and uncertainty in oil markets and among consumers," said al-Naimi.
He pledged in the long run that Saudi Arabia will be able to substantially expand production using new technologies and he discounted that global oil supplies have, or will soon peak.
Asked if he and executives of Saudi Aramco, the government-owned oil company, "live in fear" that the United States might one day become energy independent, he replied, "The answer is no. We welcome conservation."
The panel discussion, moderated by former Energy Secretary James Schlesinger, was sponsored by the Center for Strategic and International Studies.
Bodman and al-Naimi were to meet privately later in the day.