Lost Leverage: Oil

New Forces Fraying U.S.-Saudi Oil Ties. (Los Angeles Times)…Paul Richter, June 8, 2008, Pg. 1

…The weakening of the economic relationship comes when the vital U.S.-Saudi security relationship also has been fraying.

As gasoline prices have risen, the White House has unsuccessfully exhorted the Saudis to step up production, and Congress has threatened retaliation. But the situation now is a far cry from the days when the U.S. economy dominated the direction of the petroleum market.

“That gave us leverage,” said Greg Priddy, an oil analyst at the Eurasia Group, a New York-based risk assessment firm. “There’s certainly a perception that the power equation has changed.”

China and other Asian nations now use about 17 million barrels a day. That’s up more than 20% since 2003, and booming growth is expected to continue.

By the end of 2007, it was also apparent that the Saudis no longer believed they could substantially affect prices by increasing production.

Now, Saudi oil experts believe that the price run-up is due to such factors as investor speculation, the weak dollar and limited output from such key producers as Iraq, Iran and Venezuela.

In mid-May, President Bush went to Saudi Arabia for the second time this year to seek increased oil production, but officials in Riyadh, the Saudi capital, said no large increases were planned. Sen. Hillary Rodham Clinton (D-N.Y.) criticized Bush in her presidential campaign appearances, saying she found it embarrassing that a sitting president was “begging” the Saudis.