Oil Prices Gone Wild

Oil producing and consuming nations gathered on Sunday in Jeddah, Saudi Arabia to discuss out-of-control oil prices. The meeting is focused on exploring the possibility of a quick fix to reduce prices. Reporter Caryle Murphy speaks with host Guy Raz.

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GUY RAZ, host:

Oil prices are too high. That's the extent of agreement between oil producing and oil consuming nations. Where they differ is over why. The U.S. argues it's because of weak production. And Saudi Arabia blames the cost on market speculators. Well, officials from both of those countries and several others are meeting in Jeddah, Saudi Arabia this weekend to try and figure out how to bring the price of oil under control.

Reporter Caryle Murphy is covering the conference and joins us from Jeddah. Caryle, first of all, I understand Saudi Arabia has agreed to increase its oil production.

CARYLE MURPHY: Well, even before this meeting it agreed to increase its production by 500,000 barrels a day as of July. And they had done that increase at the request of the United States government.

RAZ: Now just to make it clear, that would mean Saudi Arabia would raise its output to the highest level in decades, right?

MURPHY: That's correct. And they have also announced plans that they would increase that level to almost 12 million barrels a day by the end of 2009. But the Saudis contend that increasing production, increasing supplies of oil is not going to help very much because in their view, what's causing this big problem is financial speculation in oil market futures.

RAZ: What about other oil producing countries? Are they planning to follow Saudi Arabia's cue here?

MURPHY: It's not clear. They haven't said if they've changed their mind. Prior to the conference the head of OPEC said that they didn't see any reason to increase supplies. Saudi Arabia has a lot of clout still and behind the scenes it will probably convince other OPEC countries to help as much as they can. However, all those other countries do not have the capability to increase their production much. Only Saudi Arabia has that capability.

RAZ: Now, Caryle Murphy, the U.S. Energy Secretary Samuel Bodman is at the meeting and his position is that the price of oil is high because production is too low. So how is that argument being received there?

MURPHY: Well the Saudis were very open about their disagreement with Mr. Bodman. The Oil Minister Ali al-Naimi made it very clear in his remarks that he did agree that lack of supply was the entire reason for the high oil prices. He acknowledged as other oil producing countries acknowledge that the market is tight. But OPEC maintains that it is covering the demand which is coming mostly from China and India because of their booming economies.

RAZ: So what practically, besides Saudi Arabia's announcement to increase production has been decided at this meeting in Jeddah?

MURPHY: Not much. Just a few minutes ago, they issued the final communicae to this meeting. And it was very vague and it was not something you could point to say, oh, whew, we're glad they're doing that. Nobody expects oil prices to go down immediately because of this meeting. All the things they recommended in the final communicae are going to take time to implement if - even if they do get implemented.

RAZ: Reporter Caryle Murphy is in Jeddah, Saudi Arabia covering the emergency meeting of oil producing and consuming nations. Caryle, thanks for joining us.

MURPHY: You're welcome.

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