The U.S. energy secretary said Saturday that insufficient oil production, not financial speculation, was driving soaring crude prices.
Samuel Bodman's comments on the eve of an energy summit in the Saudi port city of Jiddah set the stage for a showdown between the United States and conference host Saudi Arabia, which has largely blamed speculation in the oil markets for record prices.
The U.S. and many other Western nations have put increasing pressure on Saudi Arabia, the world's top oil exporter, to increase production. Saudi officials have been hesitant to do so, arguing that soaring prices have not been caused by a shortage of supply.
Bodman disputed that assertion Saturday, saying oil production has not kept pace with growing demand, especially from developing countries like China and India.
Digital Access for only $0.99
For the most comprehensive local coverage, subscribe today.
“Market fundamentals show us that production has not kept pace with growing demand for oil, resulting in increasing prices and increasingly volatile prices,” Bodman told reporters. “There is no evidence that we can find that speculators are driving futures prices” for oil.
He said commodities markets have experienced a huge influx of money from financial investors in recent years, but they have been following the market upward rather than driving the increase in the price of oil.
Saudi Arabia called the unusual meeting in Jiddah between oil producing and consuming nations as a way to show that it was not deaf to international cries that high oil prices have caused social and economic turmoil.
The Gulf nation has also become increasingly concerned that record oil prices could hinder growth in the U.S. and other major industrialized economies, potentially leading to a decline in oil demand and a sharp drop-off in prices.
While Saudi Arabia has been reluctant to drastically increase production, it has announced several small increases recently that it says were made to satisfy increased customer demand. The country has consistently said that it will produce enough oil to ensure the market is supplied.
The kingdom increased oil production by 300,000 barrels a day in May, and a Saudi official confirmed Saturday that the country would add another 200,000 barrels a day in July. The official spoke on condition of anonymity because of the sensitivity of the information.
Saudi Oil Minister Ali al-Naimi also confirmed the increase ahead of the conference. But neither announcement has done much to stem the run-up in the price of oil, which closed near $135 on Friday.
Saudi assistant oil minister, Prince Abdulaziz bin Salman, told a news conference Saturday that the delegates were “congregating to achieve results” and try to draw “a collective way forward for how to attend to this situation.”
“This situation as we see it today as it exists needs everybody's attention simply because it no longer is a luxury to talk about it or … to keep bouncing back and forth blame,” he added.
The prince reiterated that the kingdom was ready to meet demand from its customers and foster stable prices.
He said it would be “wrong” to judge the success of the meeting by oil prices the day after it ends.