Saudi leader: Don't blame us for high prices

Ali al-Naimi says high prices the result of refinery outages and political tensions, not market fundamentals or shortages.
July 11 2007: 8:07 AM EDT


WARSAW (Reuters) -- Near-record oil prices are unrelated to supply and demand and none of Saudi Arabia's customers is asking for more crude, the kingdom's Oil Minister Ali al-Naimi said on Wednesday.

Tightness in supplies of refined fuel like gasoline and international political tensions are helping propel oil's rally, Naimi told a news conference.

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"The price today is not at all connected with the fundamentals of the oil industry. There is a good balance between supply and demand. Inventories are in a comfortable position, therefore fundamentals do not support high prices today," the oil minister of top exporter Saudi Arabia said.

Oil has been on an upward march since January when it sank to about $50 a barrel. Concerns over shortages of gasoline in top consumer the United States and two rounds of OPEC supply curbs have helped push prices higher.

"What is impacting the prices are political problems in the world and also the situation of refineries," said the influential Saudi oil minister.

"There are problems not in the supply (of crude) but probably more of a problem of supply of products from refineries," he added.

"Firstly because of the shutdowns that are occurring in different parts of the world and also because of insufficient refining capacity in the world."

No demand for OPEC crude
Major consumer governments represented by the International Energy Agency have urged the Organization of the Petroleum Exporting Countries to boost production to cool prices.

But OPEC ministers have refused.

Naimi said the kingdom stood ready to raise production, but the demand was not there to justify such a move.

"Saudi Arabia definitely has the spare capacity to do so, but you can't put oil on the market without a buyer," he said.

"Nobody today is looking for additional crude because all you have to do is look at the level of inventories which are in a very, very comfortable position."

U.S. crude stocks are at a 9-year high.

In Doha, Qatari energy minister Abdullah al-Attiyah had earlier sounded the same message as his Saudi counterpart.

"The world is facing a shortage of gasoline and diesel, but not crude oil," said Attiyah.

"If the market needs more oil, OPEC will do its utmost but it needs to be convinced that there is a shortage."

The Saudi oil minister said Riyadh was pumping about 8.6 million barrels per day (bpd), a level it has stuck to since February - the start of OPEC's second round of supply curbs.

OPEC, which pumps more than a third of the world's oil, next meets in September to chart output policy. Some officials have suggested the exporters may have no reason to change tack then.

For now, some analysts agree with OPEC that slow refinery operations, especially in the United States, and a rush of speculative fund flows are driving prices higher.

London Brent crude hit an 11-month high at $76.63 a barrel on Tuesday, not far from a record $78.65 last August.

"You know how much speculative money there is in then market? Plenty," Naimi said.

 

Wow I feel like I should understand this a little better.

 

me too. but if i understand the whole picture correctly us consumers are paying more than they should have to because:

1- there aren't enough refineries

2- it takes forever to build a new refinery because our govt's red tape bs

3- the refineries we do have are on the verge of obsolete because the oil companies didn't keep up with upgrades and maintanence

i don't understand how the market can drive up crude oil prices over this though. it seems that only the price of refined fuels should be affected but like i said, i don't understand much of it.

 

The largest part of these price spikes has to do with futures trading.
That and media BS scaring people into a frenzy. A single news story about a comming shortage due to hurricane, political hickups in the gulf or a flooded refinery in Coffeeville Kansas makes everyone go out and buy gas right then and guess what? The demand percentage just went up and a shortage occures.

 

Gas and diesel prices are set on consumer demand....the more we use the higher it will go period...as long as we need the fuel the demand wont go down either

refining capacity is maxed out and no new refineries have been built in 20 years ...so if a refinery burns up then the output drops and all the other refineries are at full tilt already so this creats a shortage of supply....ever heard of causing a shortage to create a demand....

I remember years ago when Paul Harvey did a story of some bizare *** stuff then in the end he made an inocent comment of "whats next a toilet paper shortage"............within weeks we had a toilet paper shortage cuz everyone went out and bought the stuff by the case and put it in their basement

 

I think thats almost exactly what i said....

 

Well if you were a refinery and making record profits at current levels and are not being forced to upgrade or build new facilities, why would you. I dont hold anything against a business wanting to make a profit, BUT, I do feel some common sense approach would be much better to their favor in the public eye. I was told in early spring by a fuel distributor that diesel fuel prices werent expected to jump this summer like gasoline prices. Reason he gave was at that time there was a much greater supply of diesel in reserve and not enough storage for summer grade gaoline. And the fuel companies were wanting the diesel fuel usage to increase to open up storage for gasoline. At the time I doubted him, but now seeing here how diesel fuel hasnt increased much more than 10 cents over all I tend to say his info wasnt so far off. When usage information shows the average consumer is still willing to pay the price for fuel and there hasnt been a reduction in consumption, why then wouldnt you jack the price up and up to see just how high it can go till it finally peaks. Yes society today is geared around having the freedom to just go when and where ever we please. I always thought it odd how growing up we could have gotten almost every need we had with in a 5-10 mile drive. Now for the most part we figure 20-25 miles instead. And here we are paying the highest prices for fuel and driving farther and farther to shop which in turns drives up the consumption. Doesnt make much sense to me.

 

Oil settles below $73 after a jump on demand

The world's most actively traded commodity saw a boost by strong fundamentals and speculative buying by hedge funds and pension funds.
July 12 2007: 12:44 PM EDT


LONDON (Reuters) -- Oil settled lower following an upward march early Thursday, underpinned by strong fundamentals and increased flows of fund money into the world's most actively traded commodity.

U.S. crude dipped 16 cents to $72.40 after topping $73 earlier in the day.

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London Brent crude was up 71 cents to $76.15 after it touched a session high of $77.07, within striking distance of its record high of $78.65 set in August last year.

 

We have an opportunity here to have a new refinery built. They have approached the town of Elk Point , S.Dak. about building it there. It will be built in the heart of ethanol country. Many are for it but there are a lot against it. They fear they will pollute the land and destroy the enviroment. Thats nuts!! This will be the first new refinery built in years and is suppose to be a "green" refinery. Meaning enviromentally friendly. I am all for it. We need the refinery and I really dont think they want to destroy the enviroment if they want to stay in business in the first place. It will be an excellent opportunity to blend more ethanol into the gas. There is also a Canadian-American oil pipeline that will go thru here. It is suppose to be going to some refineries to the east of here. This is suppose to bring more oil from the north to the refineries here and keep a more "steady" flow they say. Many are against that too, for fear it will ruin the land and enviroment. Geesh!! And they complain the price of gas is terribly high!! Some people just seem so dense!!

 

A new refinery up there would be a very good thing....they have to convince those people. Public awareness for these kind of projects is hard to pass sometimes but very important.