Quote:
Originally Posted by MRM
It's not good news. We're putting pressure on Saudi Arabia for minimal short term gains, putting them in a bad position vis a vis their neighbors and competitors. We're making it look like moderate Arab states are lackeys of the US who will cave in to us whenever Bush asks them to dance, which raises resistance to America across the Middle East and strengthens the argument of countries like Venezuala and Iran, whoi have been saying this for years. All in return for a symbolic increase in production that will have no measurable effect on US consumer prices.
A better idea would be a foreign oil tax or any of a million ideas on developing real alternatives to imported oil. The problem is that these would be long term solutions that would take some real effort, but would pay off for decades. But our country is currently not looking beyond November or January.
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The decision to raise output by a measly 3% was made on May 10. It was already a done deal. All spin now is just to save a little face for Bush who went in with a stacked deck and still had to fold. 3% increase is meaningless in the world market, even when it's SA.
``On May 10 we increased our response to our customers by 300,000 barrels because they asked for it,'' al-Naimi said later. ``So our production for June will be 9.45 million barrels per day. This is the request of about 50 customers worldwide.''
In another sign of cooperation, Saudi Aramco, the kingdom's state-run oil company, and U.S.-based ConocoPhillips said they will build and own a 400,000 barrel-a-day refinery in Yanbu on the Saudi Red Sea Coast, to be completed by 2013.
Oil prices have doubled in the past year on surging demand, supply disruptions in places such as Nigeria and commodity purchases by investors as a hedge against a weakening U.S. dollar. The price surge threatens to accelerate inflation and curb economic growth.
``The Saudis have engineered this to make it look like they're doing something to help, but the market is rightfully skeptical,'' said Robert Laughlin, a senior broker at MF Global Ltd. in London.
Filling the Gap
``As far as the U.S. is concerned, most of the 300,000 came from the U.S. and we responded to it on May 10,'' al-Naimi said, referring to the kingdom's production increase. Saudi Arabia is making up for output losses from other countries, such as Nigeria, Venezuela and Mexico, he said.