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January 16, 2008
Bush Jawbones Saudis on Oil Prices
Continuing his visit to the Middle East, President Bush promised to raise the issue of high oil prices with King Abdullah of Saudi Arabia:
“My point to His Majesty is going to be, when consumers have less purchasing power because of high prices of gasoline — in other words, when it affects their families, it could cause this economy to slow down,” the president said in an expansive interview summarizing his eight-day trip to the Middle East. In short, our buddies the Saudis told the President to take a hike. It is doubtful that the Saudis could raise their production much anyway given how close they are to capacity right now. And no one else in OPEC wants to be the first ones to goose production while oil is at or near $100 bbl.
“If the economy slows down, there will be less barrels of oil purchased.” It was unclear whether Mr. Bush’s entreaties alone would have any significant effect on the price of oil, because, as the president acknowledged, demand continues to rise faster than supplies, especially in expanding markets in China and India, as well as the United States.
Neither King Abdullah nor Mr. Bush discussed the matter publicly as they met for dinner inside a tentlike hall on Tuesday night, chatting instead about the unusually cold weather. But Saudi Arabia’s oil minister, Ali al-Naimi, appeared to rebuff the president’s appeal earlier in the day.
Saudi Arabia, he said, shared the president’s concern that a downturn in the American economy could have profound effects around the world, including on the oil market. He even raised the prospect of “recession,” a word Mr. Bush studiously avoided in the interview, even when pressed about “the R-word.” But Mr. Naimi said Saudi Arabia would raise production only “when the market justifies it.”
The market will determine the price. And oil will only go down when the demand lessens - a certainty if the US economy goes into a recession.