Tuesday, May 20, 2008

Saudis Reject Bush Plea -- Oil Prices Soar Again; U.S. Halts Reserve Buys

Saudi Arabia rejected President Bush's appeals to increase oil production and the Energy Department announced it would halt shipments to the Strategic Petroleum Reserve as oil barreled to a record close Friday.

The day's events meant no relief for U.S. motorists suffering pain at the pump.

Bush, visiting Saudi Arabia on Friday for the second time in five months, had hoped to use his oil industry background and ties to the Saudi leadership to persuade them to increase their current oil production of 9.15 million barrels a day. But despite receiving a red carpet welcome in Riyadh, where gasoline costs 50 cents a gallon, Bush was rebuffed.

Saudi oil minister Ali al-Naimi said his nation already had marginally boosted production by about 300,000 barrels a day, as of May 10, to meet world demand, as they see it. This will boost output to 9.45 million barrels a day in June.

"Supply and demand are in balance today," al-Naimi told a news conference. "How much does Saudi Arabia need to do to satisfy people who are questioning our oil practices and policies?"

Stephen Hadley, the president's national security adviser, briefed reporters after the private meetings between Bush and King Abdullah at the king's ranch.

"What they're saying to us is ... Saudi Arabia at the present time does not have customers that are making requests for oil that they are not able to satisfy," Hadley said. And despite the production boost announced "in order to meet the demand of their customers, in their judgment ... even increased production under this policy would not result in dramatic ... reduction of gas prices in the United States."

Economists say prices are being driven up by increased demand, not slowed production. Energy-guzzlers China and India are stretching supplies.

While the overtures to Saudi Arabia failed, the Bush administration said it is suspending oil deliveries into the government's Strategic Petroleum Reserve for the remainder of the year.

The move came days after Congress passed legislation requiring Bush to temporarily halt shipments into the reserve in hopes of lowering gasoline prices. Although the president dismissed the idea as a small step that would have little affect on U.S. gas prices, Bush is expected to sign the bill.

The Energy Department moved to comply with the congressional mandate, saying it will not sign six-month contracts to have begun starting July 1, for the acceptance of 76,000 barrels of oil a day.

The department also plans to defer deliveries under existing contracts once the legislation passed by Congress late Wednesday becomes law.

The reserve, a system of salt caverns on the Louisiana and Texas Gulf coast, is 97 percent full, holding 701 million barrels of crude. The stockpile, currently sufficient to cover two months of oil imports, is kept as a cushion in case of a major disruption of oil supplies.

Both the House and Senate by lopsided votes this week directed the president to suspend the oil SPR shipments with both Republicans and Democrats saying it made no sense for the government to take oil at today's prices. The crude oil would better be left on the market to increase commercial supplies, they said.

In New York on Friday, oil traders were not impressed by the news of Saudi Arabia's small production increase and the Strategic Petroleum Reserve moratorium. They did what they've been doing for months now, and pushed crude oil and gasoline futures to new highs.

The price for a barrel of benchmark light, sweet crude for June delivery jumped $2.17 to settle at a record close of $126.29 on the New York Mercantile Exchange. Earlier in the session, prices surged to $127.82 a barrel, also a record high.


Pump pressures

Memphis gas

Here are the most recent average prices per gallon in the Memphis market:


Regular unleaded

$3.623 $3.614


$3.835 $3.825


$4.019 $4.009


$4.327 $4.293

Note: Gas price includes 18.4 cents federal tax, 21.4 cents Tennessee tax (18.4 cents on diesel).

Friday's U.S. oil price: $126.29 a barrel for light sweet crude, June delivery, up $2.17 on the New York Mercantile Exchange.

Get it Cheap

Among the least expensive places in Greater Memphis to buy fuel (per gallon over the past 72 hours):

$3.49: Texaco, 4286 Macon.

$3.54: Texaco, Hickory Hill & Winchester; Citgo, 5930 Winchester, and Winchester & Old Getwell.

$3.55: Murphy USA, 6506 Memphis-Arlington, and Citgo, 6505 Memphis-Arlington, both in Bartlett.

Sources: American Automobile Association Daily Fuel Gauge Report via Oil Price Information Service, Associated Press, MemphisGasPrices.com.

- Mark Watson


Originally published by From Our Press Services / Mark Watson contributed .

(c) 2008 Commercial Appeal, The. Provided by ProQuest Information and Learning. All rights Reserved.

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