Bush and Saudi Prince focus on long-range oil plan

US President George W. Bush walks hand-in-hand through Texas bluebonnet wildflowers with Saudi Arabia's Crown Prince Abdullah on his Crawford ranch. Picture / Reuters

CRAWFORD, Texas - President Bush has pressed Saudi Arabia to take steps to relieve record-high oil prices, but the world's largest exporter insisted global supplies were adequate and offered a long-term plan to increase production.

Bush met Saudi Crown Prince Abdullah at his Texas ranch as consumer worries about soaring US petrol prices weighed on the president's job approval ratings.

"The crown prince understands that it is very important ... (to) make sure that the price is reasonable. A high oil price will damage markets, and he knows that," Bush told reporters before welcoming Abdullah at his Texas ranch. Saudi Arabia is the biggest producer within the Organisation of Petroleum Exporting Countries.

"This is an important relationship," Bush said. He greeted the Prince, who is in his early eighties, with a kiss on both cheeks and then firmly held his hand to guide him up the stone steps leading to the office on the president's ranch.

The White House is facing growing consumer unease over oil prices that have steadily risen during the past year, reflecting the rising demand for energy in China and India and little new global production.

"Obviously, with the states like China, India and others coming on line, there is a concern about demand and supply. And those issues have to be addressed, not by jawboning, but by having a strategic plan for dealing with the problem," Secretary of State Condoleezza Rice said.

EXPANDING CAPACITY

Both Saudi and US officials focused on a previously announced long-term plan, in which Saudi Arabia pledged to invest US$50 billion to expand its crude oil production capacity to about 12.5 million barrels a day by the end of the decade, and even more in the next decade. But officials said it was unclear whether it would lower oil prices in the near-term.

"It's hard to say," Stephen Hadley, White House national security adviser, said. "But clearly, the news that came out of the meeting today ought to be good news for the markets. And we would hope that and other factors would result in some positive news in terms of the price fronts," he said.

Adel al-Jubeir, Saudi foreign affairs adviser, said while the current price of oil was too high, his country's energy policies remained consistent and unchanged.

"Our policy is to ensure that the markets are adequately supplied. We have been doing so in the past. We are doing so now. We will do so in the future," he said.

US crude oil prices hit record highs in April, briefly topping US$58 a barrel, and nationwide retail petrol prices have climbed to US$2.28 a gallon.

"There is no shortage of crude oil in the market today; what we see is a shortage of refining capacity," Jubeir said.

Democrats criticised the Bush administration's energy policy. "It is wrong that the president has let our national energy policy go so awry that he is asking a foreign prince for favours," Rep. Edward Markey, a Massachusetts Democrat said.

ADDITIONAL DRILLING

The Republican-controlled House of Representatives has approved an US$8 billion energy bill with incentives to increase domestic production of crude oil, natural gas and other energy sources. It would also allow oil drilling in Alaska's Arctic National Wildlife Refuge. The Senate was expected to complete its version of the bill in May.

Bush and Abdullah also discussed the Palestinian-Israeli peace process and democratic reforms in the Middle East. They pledged continued cooperation in fighting terrorism.

Saudi Arabia's image in America was tarnished after the Sept. 11, 2001, attacks in which 15 of the 19 hijackers were Saudi citizens and members of the al Qaeda network led by Osama bin Laden, who was born in Saudi Arabia. The kingdom has disavowed bin Laden.

The American invasion of Iraq in 2003 angered Saudis. But US-Saudi ties strengthened after the kingdom took steps to capture or kill senior al Qaeda members within its borders.

The Saudis are hoping for an agreement that would clear the way for the kingdom to join the World Trade Organisation, and officials have been trying to iron out final sticking points.

"The two countries have come very, very close to reaching a bilateral agreement on trade," Jubeir said. Remaining technical issues were expected to be resolved soon, he said.

- REUTERS