US oil independence drive may backfire-Saudi official

<a href+http://www.forbes.com/business/newswire/2003/03/24/rtr916669.html>Reuters, 03.24.03, 4:41 PM ET By Richard Valdmanis SAN ANTONIO (Reuters) - The United States' drive to increase its energy independence could backfire by hurting the U.S. economy and creating political instability in countries which depend on oil export revenues, a top Saudi Arabian oil official said Monday. "Such a direction is characterized by disengagement, risk of economic stagnation, accompanied by instability in parts of the world," said Sharaf Salamah, the president of Saudi Refining. The Bush administration has said it wants to increase domestic U.S. energy supplies to lessen its growing reliance on imports, which supply more than half of U.S. oil needs. Saudi Arabia, the world's largest oil producer, was the biggest supplier of crude oil to the United States last year, sending more than 1.5 million barrels daily. "The U.S. is one of the most important economic markets for our exporters and, in fact, our producers are more dependent on export revenues than the United States is on what it imports," Salamah said at the annual National Petrochemical and Refiners Association meeting in San Antonio. Saudi Refining owns 50 percent of U.S. oil refining firm Motiva Enterprises LLC. U.S. crude oil prices rose to 12-year highs near $40 a barrel less than a month ago as a two-month oil strike in key South American supplier Venezuela and a cold northern winter strained supply. Dealers also feared war in Iraq could upset supplies from the Middle East which ships 40 percent of the world's oil exports. Oil prices have since fallen below $29 after Saudi Arabia raised production to make up for lost Venezuelan supply. The dramatic moves in oil prices have raised hackles in the world's largest energy consumer, where retail gasoline prices recently hit a record high at $1.72 a gallon, well before peak demand summer driving season. Saudi Arabia has assured oil markets that it could further increase its output if required to stabilize prices. "Saudi Arabian oil policy rests on two main pillars, to maintain market stability to support the world economy, and encourage equitable oil prices to support the Saudi economy, which the Saudi Arabian government is working hard to diversify," Salamah said. "We continue to monitor the situation and are fully prepared to take appropriate action as necessary. To fulfill the promise of supporting the market's stability, Saudi Arabia currently maintains over two million barrels per day of surplus production capacity," he said. Salamah, who was chosen to speak at the NPRA conference after Saudi Oil Minister Ali al-Naimi canceled his trip due to the onset of war, said that Saudi Arabia's commitment to ensuring a stable oil market eliminated the need for U.S. energy independence. "The concept of self-sufficiency has been discounted a long time ago as part of the move toward a global society... where each nation specializes in what it does best," Salamah said. "This is the recipe for economic optimization."