In the face of pessimists, international crises and political turmoil, Saudi Arabia continues to stand behind its oil-production commitments to the U.S., according to Prince Saud Al Faisal, Saudi foreign minister. Faisal spoke in Houston at The James A. Baker III Institute for Public Policy at Rice University just days before Hurricane Rita delivered a second blow to the Gulf of Mexico oil and gas production industry. He said efforts to question Saudi performance are pulling attention from the real energy-crisis issues. "The focus on tarnishing proven Saudi performance is largely a distraction from the fact that the key price and supply issues affecting you are not about volumes of production, but rather about gasoline formulations, limited refinery capacities, lack of storage capacity and the various other restrictions that have paralyzed the energy industry in the Western Hemisphere." The Energy Information Administration reports that daily global refining capacity has only increased by 1.3 million barrels during the past five years, while daily oil demand has increased by more than 7 million barrels. Global refining capacity is now 82.7 million barrels per day-1 million short of global demand. No refineries have been built in the U.S. since the 1970s. Since 2002, oil prices have doubled. This sharp price increase is only a phase of a cumulative process that has been going on for some time, he said. "Resolving the issues before they become too severe to manage becomes a matter of urgency and priority for all of us, especially when Saudi-bashing has become fashionable and allocating blame has become an end in itself." On the supply side, there is no shortage of oil-but there is no excess production capacity. This imbalance has sparked many energy debates that fail to offer definitive answers about how the energy markets are fated, but Faisal said Saudi Arabia's track record is a proven one. "We have kept our commitment even when wars were being fought in our region, when oil tankers were being set ablaze in the Gulf, and when our cities and oil facilities were being attacked by Scud missiles." For the past 20 years, Saudi Arabia has maintained between 1.5- and 2 million barrels of daily excess capacity. Its daily production this year has increased by 700,000 barrels from last year-supplying more than half of the global increase in demand. By 2009, Saudi Arabia plans to produce 2.4 million more barrels daily. "We have signed drilling contracts, selected project-management teams, allocated funds and put the initial plans on the drawing boards. And unless the international energy companies use up the equipment we have on order and divert contractors from our oil fields to other projects, we see no problem in achieving our objectives." After expressing his confidence in Saudi Arabia's plan for production growth, Faisal said the energy industry would do well to turn its attention to the real issues. The M&A frenzy that has gripped the E&P industry had many professionals thinking that the oil and gas industry would "experience a tremendous revival ...but this did not materialize," Faisal said. "Oil companies may have forgotten that calculated risk-taking is the means to higher profit-making. They may have opted for the ease of the cautious advice of corporate accountants instead of the spirit of adventure that has characterized the oil industry from its inception." Pointing at problems is much simpler than offering solutions, he said. "What is certain is that we need to move away from the blame game and recognize that the desired solutions can only be arrived at through collective cooperation."
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