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Global Oil Crisis: Jeddah Deepens Oil Price Dialogue, But No Quick Fix

Jeddah Deepens Oil Price Dialogue, But No Quick Fix

Published: June 23, 2008

Filed at 2:57 a.m. ET

Reuters

JEDDAH, Saudi Arabia (Reuters) – World energy powers embarked on a new level of dialogue to try to rein in runaway oil prices at an emergency meeting in this Red Sea city, but were unable to come up with a quick fix.

Host Saudi Arabia vowed to pump still more oil in response to consumer countries’ requests, but said that alone would not be enough to calm a market driven to a record close to $140 a barrel last week by an array of factors.

“In this critical hour, the world community should rise to its responsibility and cooperation should be the cornerstone of any efforts,” Saudi King Abdullah said on Sunday, calling for a global “energy-for-the-poor” initiative.

A barrel of oil has doubled in price over the past year, stoking inflation and triggering protests from Asia to Europe.

Major producers, consumers and top oil company executives gathered in Saudi Arabia’s commercial capital to try to reverse what some see as the world’s third oil shock.

They plan to hold a follow-up meeting in London before the end of the year.

“What I’ve heard so far are basically all good ideas, but it will probably not change the price tomorrow morning,” Royal Dutch Shell CEO Jeroen van der Veer told Reuters.

The final communique, echoing previous consumer-producer statements, emphasized the importance of greater transparency in oil markets and more investment in production.

Even if any price impact might not be immediate, other executives said the meeting had achieved a higher level of dialogue.

Total CEO Christophe de Margerie said there was now agreement on the need for “a common effort.”

“It’s not just producers and consumers anymore, it’s everyone,” he said.

The CEOs and other delegates to Sunday’s meeting took part in a similar session two months ago in Rome, where producers and consumers failed to agree publicly that oil prices were too high.

But oil’s near $20 rise since then has all more openly united over the exorbitant cost of fuel. U.S. crude settled just under $135 a barrel on Friday.

“What we’ve got here … is agreement that the oil price is too high,” said British Prime Minister Gordon Brown, the highest level foreign visitor to the talks.

SAUDI BOOST

Top exporter Saudi Arabia has led the effort to lower prices by offering to pump as much oil as its customers want. But the promise even before Sunday’s meeting of more supply has not slowed oil’s ascent.

“The meeting was a bit disappointing,” said a European diplomat. “The only producer that came up with any concrete proposals was Saudi Arabia — all the other producers just made bland statements about future capacity plans.”

Riyadh will raise output to 9.7 million barrels per day (bpd) in July, its highest rate in decades, and is prepared to go higher still. But the kingdom’s oil minister said that was unlikely to cool prices.

“I am convinced that the supply and demand balances and crude oil production levels are not the primary drivers of the current market situation and that markets are already well-supplied,” Ali al-Naimi said in a speech.

“A simplistic focus on supply expansion is therefore unlikely to tame the current price behavior.”

Most in the Organization of the Petroleum Exporting Countries (OPEC) share the influential Saudi minister’s view.

“Do not expect this problem to be solved in a day,” said OPEC President Chakib Khelil.

The producer group next meets to reconsider its formal output targets in September.

There is no consensus on the cause of high oil prices, for which there are many explanations.

OPEC ministers have repeatedly blamed speculation and have argued a massive flow of investment funds, which has helped to boost oil and other commodities markets, should be controlled.

Some consumers have said there could be an element of speculation but Sam Bodman, energy secretary of the world’s biggest energy consumer the United States, said the focus was misplaced.

“There’s no evidence we can find that speculators are driving futures prices,” he said on Saturday.

Consumers in Asia, including the world’s number two oil burner China, have begun to reduce subsidies, raising domestic fuel prices, which over the longer term could curb demand.

(Additional reporting by Alex Lawler, Barbara Lewis, Gernot Heller and David Clarke, and Inal Ersan in Dubai; Writing by Jonathan Leff; Editing by Dominic Evans)

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