Saudi Arabia will produce more oil – if customers need it – the kingdom's oil minister promised Sunday.
For the remainder of the year "Saudi Arabia is willing to produce additional barrels of crude oil above and beyond the 9.7 million barrels per day which we plan to produce during the month of July," Oil Minister Ali al-Naimi said at a rare meeting of the world's top energy officials in this Red Sea port town.
The unusual gathering was called by the Saudis to draw up a plan of action to address the unprecedented rise of oil prices and to defuse what Saudi officials see as an alarming political backlash against oil-exporting nations.
Mr. Naimi also said Sunday that the kingdom was willing to invest to boost its spare oil production capacity above the current 12.5 million barrels per day planned for the end of 2009, reversing previous statements that the country would not go beyond that figure.
"In addition, we have identified a series of future crude oil megaincrements totaling another 2.5 million barrels per day of capacity that could be built if and when crude oil demand levels warrant their development," he said.
The world's biggest oil producer has already announced modest increases (300,000 barrels in June, and 200,000 in July) but those steps have not done much to stem the skyrocketing price of oil, which closed near $135 a barrel on Friday.
Politicians and financial analysts, however, say there is no quick fix for the coincidence of complex economic factors pushing oil prices up.
"We [have] been 30 years digging ourselves into this hole, and this is not something we're going to be relieved of in any short term," US Energy Secretary Samuel Bodman told reporters here.
Oil's soaring price has contributed to the spikes in food and transportation costs that have sparked angry street protests in places as diverse as Spain, Nepal, Indonesia, and Egypt. Americans are furious about $4-a-gallon gas, and airlines are abandoning low fares to cover higher fuel costs.
Politicians in oil-consuming and oil-producing nations fear that rising prices could contribute to a global recession that would hurt all sides.
Participants in the Jeddah summit, including Chinese Vice President Xi Jinping, had differing views on the causes of the runaway oil prices. On Sunday, King Abdullah said Saudi Arabia was not to blame, pointing the finger at speculators, high fuel taxes in consuming countries, and increased oil consumption in developing economies.
Most analysts agree that the oil-price escalation is also abetted by a weak US dollar and perceptions of political tumult in the Middle East, where the future of US- occupied Iraq is uncertain, Lebanon is politically unstable, and Israel is threatening a military strike on Iran's suspected nuclear enrichment facilities.
"Fundamentally tight market conditions, in our view, are the main driver of price increases that we have seen over the last five years and particularly during recent months," Mr. Bodman told reporters.
The kingdom – the only major exporter with enough capacity to significantly increase production – is under intense pressure from Western governments to increase output. Angered by high oil prices, Congress has initiated moves – so far unsuccessful – to force Saudi Arabia's hand. These have included a proposed halt to a major US arms sales package to Riyadh and draft legislation to allow US prosecutors to charge OPEC countries with antitrust violations.
Members of the Organization of Petroleum Exporting Countries (OPEC), the cartel of 13 major producers, say that while supplies are tight, they are meeting demand. Rather, producers say, prices are being driven up by financial investors who have moved from the now-defunct US subprime mortgage market into unregulated speculation in the oil futures market.
US officials reject this argument. "We see no evidence that financial market participation in the commodity market, the oil market in particular, has led to some systematic bias in energy prices," says Undersecretary of State for Economic Affairs Rubin Jeffrey, who is also here.
If there is one word that has long described Saudi Arabia's oil policies, it is "stability." The Saudis have prided themselves on being a reliable source of oil. They like price rises, but they dislike the wild swings that bring market uncertainty.
Only 10 years ago the Saudis were in dire economic straits. Oil was $10 a barrel and the kingdom's debts were the equivalent of 130 percent of its gross domestic product, mostly because it had financed the $60 billion-plus cost of the 1990-91 Gulf War to eject Saddam Hussein from Kuwait.
Their greatest fear, say observers, is a severe drop in oil prices that would throw their ambitious development projects, including the building of six new megacities, into disarray. Despite the cash windfall, the Saudis fear high prices will sour political ties with important allies like the US and accelerate the development of alternative fuels.
On Sunday, British Prime Minister Gordon Brown called for a "global new deal" between consumers and oil producers based on "a shared interest in a more diversified range of nonoil energy sources." He said oil exporters should be able to "recycle" their windfall oil profits "into alternative energy investments in developed market economies." In turn, Britain should offer the producers "genuine openness and partnership in our investment markets."
Cognizant of the hardship caused by high oil prices, the Saudi king called for an international initiative to help developing countries meet their energy needs, pledging $500 million in soft loans. He also suggested that OPEC contribute $1 billion.
• Material from the Associated Press was used in this report.