RIYADH/JEDDAH, 19 November 2005 — US Secretary of Energy Samuel Bodman said yesterday that the absence of refining capacity in the United States “which has been largely caused by hurricanes” has been a cause of instability in the oil market, making prices both go up and down.
“It is clear that the absence of refining and additional capacity is the cause of that,” he said.
In a press conference held in the Quincy House, the US ambassador’s residence in Riyadh, the secretary said that the United States still has three refineries that produce 800,000 barrels a day that are still “shut in”.
“One of them is intended to get up and going around in the beginning of the year and the other two might not get up and going until spring,” he said.
Bodman said refineries would make money when they operate at “very high capacity.”
He said he had not asked for any commitments from OPEC ministers to lower oil prices, saying that his department was in constant touch with OPEC and non-OPEC countries.
“It is my view that supplying nations, as a general rule, have acted very responsibly — that includes the four nations I have visited — in terms of making supplies available, particularly in the aftermath of the Hurricanes that we suffered.”
Prior to that the world was struggling with the fact that the supply of oil was barely able to keep up with demand, “particularly from the expanding economies of Asia — China and India - that appears to be continuing.”
“That will be mitigated if we have higher prices as there will be a tendency to dampen growth rates. I think we are going to see that in 2005 according to the figures I have seen and we will see a modest growth rate next year,” he added.
The energy secretary said he was satisfied with the commitment to the markets from the four Gulf countries he has visited — United Arab Emirates, Qatar, Kuwait, and Saudi Arabia — that they will be constructive in supplying the oil markets with more supplies to meet greater demand.
Commenting on the current or future cooperation between the United States and Saudi Arabia in building new oil refineries, Bodman said a number of countries have expressed interest in investing in the US, either in new refineries or expanding existing ones.
The Kingdom, he added, was already an investor in the MOTIVA joint venture in the US that refines oil for the US market.
“I do know that there are conversations going on between various national oil company and national energy company leaderships — either state governments or potential US based partners — for potential new refineries,” he said, refusing to comment any further.
He said that he had learned from his discussions with Minister of Petroleum and Mineral Resources Ali Al-Naimi that there are plans for investment to increase the refining capacity of Shayba oil plant, the world’s biggest, so that the Kingdom could be a larger provider of oil and gas to the market.
He said that the energy bill — the first bill passed in 15 years — will make substantial changes in the energy sector as well as break down some of the barriers that prevent future investment in the area.
The US secretary refused to specify what price per crude oil barrel he thought was reasonable, saying that it would be determined by the demand and supply factor.
He said that the United States would continue to import crude oil for the next several decades because it was unable to import natural gas from abroad.
“We do not have enough terminals in the US to import natural gas,” he said, adding that it was the cause for the rise of natural gas price this winter.
“We continue to have 5 billion cubic feet a day of natural gas production shut in the Gulf of Mexico.”
On average, the US uses 61 billion cubic feet, meaning that 6 to 7 percent of the national consumption is shut in and that this would not be modified until spring.
He said that the Energy Department came out with a forecast for US citizens and residents indicating that a person’s heating bill could go up by 50 percent this winter.
Bodman said that he hopes to call on Custodian of the Two Holy Mosques King Abdullah and that he would be participating in the inauguration of the permanent secretariat of the International Energy Forum (IEF) today in the capital.
