It seems that the U.S economy is heading towards a long-standing recession. With the credit crunch crisis, growing problems in Iraq, decreasing value of the US dollar vis-à-vis other main currencies, rising oil prices which exceeded the $100 dollar mark for the first time in decades came to cap it all. And as oil prices have risen about 16% this year, and the oil producers’ cartel, OPEC, has declined to raise output, the American administration, as a result, felt at sea and began to move and hold talks with oil-producing countries.
The situation on the American local front, in fact, worsened. The price of oil reached a high of $111 a barrel in the past few weeks, and has surged 77 percent during the past year, pushing up the price of gasoline and other goods. The difficult situation, apparently, rang alarm bells with the American administration.
Therefore, the US Vice-President Dick Cheney made a tour in March to the Middle East, the world’s main producer of oil, to convince oil-producing countries to increase their daily production so that oil prices would decline. During his visit to Saudi Arabia, Cheney said that his view of the current energy situation was one in which there was a dramatic increase in demand, as well as pressures from the declining value of the dollar. While announcing Cheney’s trip, the U.S President George W. Bush said that high crude oil prices were damaging the markets of Saudi Arabia’s biggest clients.
In his visit to Saudi Arabia, Cheney met King Abdullah to discuss ways of “stabilizing” the oil market. The negotiations between Cheney and Abdullah found a lot in common on the way to move forward in the international energy market. The meetings between Saudi and American officials, which also included Saudi Oil Minister Ali Al-Naimi, included a thorough discussion of short, medium and long-term goals for the oil market.
U.S officials said that they would build on the discussions begun by President Bush on his latest visit to Saudi Arabia in January, when he called on OPEC to increase oil exports and warned high energy prices were negatively affecting US consumers. Despite the calls voiced by U.S officials, El-Naimi insisted the kingdom would boost production only if the market justified it. Bush then said he hoped King Abdullah would “listen very carefully” to US concerns, and hoped to “see an increase in production”.
Nevertheless, Cheney’s talks focused on longer-range solutions to tight oil capacity. Many observers argue that he was less aggressive than his boss, George W. Bush, was when he tackled the same issue in Saudi Arabia two months ago in his Middle East tour. While Bush came to Saudi Arabia and asked OPEC to increase oil production, Cheney, during his ten-day Middle East trip, seemed less determined to pushing down prices. “High oil prices reflect primarily the reality of the marketplace,” Cheney said in Iraq at the start of his Middle East tour. “There’s just not a lot of excess capacity worldwide,” he pointed out.
In spite of the desperate American efforts in the past few months, oil producing countries in the Middle East have not responded in a manner satisfactory to the American administration. As a matter of fact, they seemed not convinced by Cheney or Bush’s view that more production is needed. Twice since Bush made his appeal in January for more oil during his Saudi visit, the Organization of Petroleum Exporting Countries, which supplies more than 40 percent of the world’s oil, has decided not to change its production plans. Al-Naimi called upon oil-consuming countries to depend more on renewable energy, like solar energy, if they really wanted to avoid the negative effects of soaring oil prices.
OPEC has quietly begun to reduce its oil production despite calls from the US and Europe for the group to pump more so that prices fall. Output from the core countries of the 13-member cartel last month fell to 27.3 million barrels a day, down from the 27.6 million barrels a day in January
