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No extra oil as Saudis cite full capacity

ELEANOR HALL: United States President George W. Bush has failed in his effort to get the Saudi Government to increase oil production in the near term.

In a meeting at his ranch in Crawford Texas the President sought the help of Saudi Crown Prince Abdullah to ease the pressure on the world price of oil.

But the Saudi Government has said there is nothing it can do because its production is already at or near full capacity, and that the long-term solution to the oil price problem is for the US to increase its investment in refining capacity.

From Washington, John Shovelan reports.

JOHN SHOVELAN: As oil prices have steadily marched ever higher, the hurt at the bowser for US consumers is being felt by the administration. Ahead of today's talks with the Saudi Prince, US officials were busy briefing journalists that the president would be demanding action from the Saudi's to increase their production to ease the price.

And as his guest's black passenger bus drove up the ranch's driveway, President Bush made it clear oil prices would be the major issue of the talks.

GEORGE W. BUSH: The Crown Prince understands that it's very important for there to be a – to make sure that the prices are reasonable. High oil price will damage markets, and he knows that.

JOHN SHOVELAN: The Bush administration wants an increase in supply by producers like Saudi Arabia. But the Saudis rejected the White House's demands, saying production isn't the cause of the price increase. Instead Adel al Jubeir, spokesman for the Saudi Government, says the US needs to increase its own refining capacity and agree on uniform petrol standards for the country.

ADEL AL JUBEIR: It will not make a difference if Saudi Arabia ships and extra million or two million barrels of crude oil to the United States if you cannot refine it, it will not turn into gasoline and that will not turn into lower prices. The infrastructure for energy globally is beginning to max out. The ability of the world to ship, to refine, to distribute, to store crude oil, is fairly close to what the amount of oil produced is today.

JOHN SHOVELAN: The Saudis offered little hope of any drop in the price of oil soon.
And US National Security Adviser Stephen Hadlee admitted the discussions hadn't been conclusive.

STEPHEN HADLEE: They did talk about refinery capacity and there was a preliminary discussion about that, and a good exchange of views on it. The Saudis have some questions about refinery capability on our side and what they can do on their side with respect to refinery capacity. I think there's more discussion that needs to be done on that issue, but it was addressed – more attention needs to be paid to it.

JOHN SHOVELAN: During the meeting between President Bush and Crown Prince Abdullah, the Saudis presented a plan to increase production capacity to about 12.5 million barrels per day by 2009.

STEPHEN HADLEE: I would say the outlook for the two countries having a common approach to dealing with the problem of ensuring adequate capacity and stability of the market certainly has been advanced by the Saudi coming forward with a very ambitious plan for investment and expanding capacity. That's a good thing, and I think speaks to some of the concerns that we've had on the US side.

JOHN SHOVELAN: If necessary, Saudi Arabia would eventually develop a capacity of 15 million barrels per day. Heavily reliant on Saudi oil, the relationship between the US and the kingdom is now a prickly one, particularly since the 9-11 attacks. 15 of the 19 hijackers were Saudi and their leader, Osama bin Laden, is also a Saudi.

John Shovelan, Washington.

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