Sunday, June 22, 2008

US Energy Secretary Blames Oil Production on Rise in Prices

On Saturday, the US Energy Secretary, Samuel Bodman, said the lack of sufficient oil production had lead to higher oil prices and not speculation or manipulation in the financial markets. These are quite surprising comments, and the fact that they were said before a conference of oil producing countries and oil consuming countries is also interesting timing.

Saudi Arabia, the host country, has stated repeatedly that they will increase production as necessary to keep up with demand, but Bodman said they have not. Bodman points to the ever increasing demand from developing countries (China, India, etc.) as the reason for needing the increased production globally. Saudi Arabia has already agreed to build infrastructure to allow for 12.5 million barrels a day in production, but they have not signaled wanting to increase oil production beyond that.

Saudi Arabia’s thoughts are that if the continued record oil prices start to hinder growth in the US and global economies, the demand for oil could drop which could start a dramatic downswing in oil prices. The issue is how to control production and the cost of oil while balancing the global economy and growth. This is not an easy task.

Do not think that Bodman only blames the oil producing countries though. Bodman clearly stated that the oil consuming nations must also do their part by becoming much more efficient with their oil consumption. From energy efficiency to alternative fuels, oil consuming nations must chip in to help.

This is a conference that the world will be watching.

Want to know more? Read the Yahoo article

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