Mr. Al-Jubeir: Well, good afternoon, everyone. It's a great pleasure to be here with you and to talk to you about the reasons for the Crown Prince's visit to the United States.
Our two countries, as you know, have been friends and allies for over 60 years. They have seen the coming and breaking of many storms. The relationship has been steadfast, and it's grown with every decade, irrespective of who the president of the United States is.
The Crown Prince comes to the United States as a friend and long-standing ally who is committed to the relationship between the two countries and is seeking ways to enhance it, strengthen it, broaden it, deepen it and revitalize it. Our countries are facing many challenges, whether it is the war on terrorism, where we face the common enemy in Al-Qaeda; whether it is trying to broaden and deepen economic ties between our two countries. And in this area, the United States and Saudi Arabia are on the verge of concluding a bilateral trade agreement which will allow Saudi Arabia to join the World Trade Organization, God willing, before the end of the year.
Our two countries also share a commitment and a concern for the well-being of the world economy: in particular, energy security. Saudi Arabia historically has been a stable and secure supplier of crude oil for the world economy, and Saudi Arabia has every intention of remaining so. Saudi Arabia believes that the price of oil should be at reasonable levels that do not harm consumers nor harm producers. We believe that long-term -- that high oil prices in the long term hurt consumers by slowing economic growth. They also hurt producers by slowing demand growth.
We also believe that low oil prices hurt producers in the short term but hurt the world economy in the long term by encouraging inefficiency, waste and so forth in consumption, which sets the stage for a future energy shock. So in that sense, we're committed to trying to balance the energy market for the benefit of the world economy.
The two countries are very concerned about regional development. We have an interest in security and stability in our region, whether that is in Iraq, where we both desire and hope for a stable, secure, unified, sovereign Iraq where we do not see interference by outsiders and where we see the well-being of the Iraqi people protected, so that the Iraqis can prosper.
We share a commitment to the implementation of UN Security Council Resolution 1559, with regards to the withdrawal of all Syrian forces and intelligence personnel from Lebanon. We have noted that Syria -- it has already done so and is on the verge of concluding it. We wish the new interim Lebanese government success as the country moves toward fair and open elections for a permanent government.
The two countries also share a commitment to try to bring peace between Israel and the Palestinians. And in this vein, we believe that the Israeli withdrawal from Gaza and the dismantling of settlements in the West Bank as parts of the steps to implement the roadmap is a positive development that we believe and we hope will continue in the direction of full implementation of the roadmap and the realization of the President's vision of two states living side by side in peace and security: two democratic states, Israel and Palestine; as well as the Crown Prince's vision for a comprehensive peace that was articulated in 2002 and that was adopted by the -- as the Arab Peace Initiative by the Arab Summit in Beirut in March of 2002.
Q Adel, what did President Bush ask the Crown Prince in terms of helping lower gas prices? And what do you believe Saudi Arabia can do to help with any -- (off mike)
Mr. Al-Jubeir: Well, with regard to the issue of gas prices, Saudi Arabia's position has been clear. We are committed to providing the world with crude oil in order to ensure that the economies have the energy to grow. We are currently producing slightly over 9.5 million barrels of oil a day. We have excess capacity or additional capacity of approximately 1.3 to 1.4 million barrels that we could bring on line. Most of that crude is heavy crude, which is not really too desirable by refiners, but it is available.
We believe that the price of crude oil does not reflect the fundamentals of supply and demand. There is no shortage of crude oil in the world today. What we see is a shortage of refining capacity, as well as shortages in infrastructures, and so forth, that drive the price of product up.
It will not make a difference if Saudi Arabia ships an extra million or two million barrels of crude oil to the United States; if you cannot refine it, it will not turn into gasoline, and that will not turn into lower prices.
We believe that the consuming countries and the producing countries have a responsibility to study these issues in a long-term basis to determine what works best for the world economy. In that vein, we have initiated in Saudi Arabia, several years ago, a consumer-producer dialogue. The idea is to look at this issue from both perspectives and ensure that there is enough energy to meet world demand in the future. Now, how we go about doing so requires further study. Does it require developing alternative sources of energy? Does it require increasing exploration and production? Does it require streamlining environmental laws? For example, in your country you have had a ban on building refineries, I believe, for the past 30 years; that's why you have a refining shortage. You have several dozen different blends of gasoline that vary from region to region that make it difficult for people to determine what type of product one should manufacture in order to sell to the United States. So these need to be streamlined.
But in any case, as far as the situation of supply and demand is concerned, we believe that supplies, as we speak, are adequate. Saudi Arabia has some spare capacity that it can produce, should we be asked to produce that spare capacity by our customers. We have not been asked for more supplies. We are also embarking on a program to increase the ability of Saudi Arabia to produce oil in the future. We believe that we will be able to produce 12.5 million barrels of oil within the next two and a half or three years. And we also have long-term plans, as our oil minister stated, to produce up to 15 million barrels of oil. So we are determined to ensure that the world is adequately supplied with crude oil.
Q What happened to the pledge that Prince Bandar made a year ago at the White House, when he said that he wanted -- that Saudi Arabia wanted to bring down the price of oil to between $22 and $28 a barrel? And now it's $55 a barrel.
Mr. Al-Jubeir: Well, I think the pledge that you're referring to, the one that was in the Bob Woodward book is fiction. Saudi Arabia --
Q I'm sorry, sir, but Prince Bandar said that in the driveway of the White House. I was there.
Mr. Al-Jubeir: Wait a minute. Saudi Arabia -- Saudi Arabia has -- I was referring to the issue of the Saudis were trying to drop the price of oil in order to help George Bush get reelected.
Q Well, I didn't ask that.
Mr. Al-Jubeir: That part is fiction. As far as the price band of $22 to $28, that was the price band that OPEC adopted several years ago. It is obvious, given the last year, year and a half, that that price band is unrealistic, given the supply-demand situation. And so therefore, we have to find a different level at which prices -- which we believe would be moderate. Now, $50 is clearly too high. Can I tell you now what we think a moderate price level is? No, I cannot. You probably need to talk to an economist about this. Where the price of oil begins to slow down economic growth, we believe, is where the price is too high. I don't know, and I'm not an economist or a statistician to figure this out. I think we'll have to see how –
Q Regarding Syria --
Q (Off mike) -- China and India for oil supplies to the actual price?
Mr. Al-Jubeir: Well, there are several factors that are driving the price of crude at the levels that we see today. One is explosive growth in China, in India, in consuming countries. Number two is a war premium or a fear premium. People are concerned about instability in Iraq, Nigeria at one point, Venezuela at another point, Russia at another point, Saudi Arabia at some point. And that puts a premium on the price of crude oil. A third factor that we believe contributes to the increase in the price of crude oil is concern for the lack of extra spare capacity. Saudi Arabia in the past has maintained between two and two and a half million barrels of spare capacity in order to deal with shortages in the market. We had to tap into that because of the shortfall in Iraqi production, so that leaves us with a spare capacity of just under 1.5 million barrels. And I think people look at growth and they look at excess capacity that's available; they don't look at excess production that's going to be available, and that drives the price up.
I also believe the shortage in refineries that I talked about earlier, refining capacity, is driving up the price of product -- gasoline, jet fuel and so forth -- which in turn is pulling up the price of crude oil.
A fifth factor, I believe is the fact that the infrastructure for energy globally is beginning to max out. The ability of the world to ship, to refine, to distribute, to store crude oil is fairly close to what the amount of oil produced is today.
And I believe some people may look at it and come to the conclusion that there is a shortage here, which we don't see. But they may think that and put pressure upwards on prices.
A final factor is simply speculation. With the low interest rates, the implied volatility in the bond markets is fairly low. So we've seen over the last two years hedge funds move very large positions into commodities and in particular oil. And we believe that as the -- as fiscal policies tighten, the -- and interest rates begin to rise a little, that the hedge funds will begin to move out of crude oil, and that may contribute to easing the speculative pressure on crude oil.
(Cross talk.) Q But were any promises made --
Q Oil is not the only issue on this summit.
Mr. Al-Jubeir: (Inaudible) -- between -- what?
Q Oil is not the only issue, we know.
Mr. Al-Jubeir: Yes –
Q Were any promises made from your side to President Bush in terms of trying to pull down the price –
Mr. Al-Jubeir : Saudi Arabia's position on the price of crude has always been very clear and very consistent.
Q But did you make any promises to the President?
Mr. Al-Jubeir: We believe that the price needs to be at levels that do not hurt consumers nor producers. We believe that -- we have always –
Q But did you promise any steps that you will take?
Mr. Al-Jubeir: We have been very clear in what we've been doing in terms of crude oil. We've made it very clear to the markets that we will supply any customer who wants to purchase crude oil from Saudi Arabia. We have indicated to the market that we are increasing our ability to produce oil over the next few years. This has been a consistent --
Q Did President Bush -- (off mike) -- request?
Mr. Al-Jubeir: I believe that the President's position has been also clear on this issue. But I'm not going to get into promises or not promises on what –
Q But did he ask Saudi Arabia to increase production?
Q Did he ask? Because he said he would ask.
Mr. Al-Jubeir: We are increasing production.
Q Did he ask?
Q Did he ask?
Mr. Al-Jubeir: I will leave that to his spokesman to answer for you.
Q Well, will you flood the oil market with oil if you're concerned about prices? Will you do that to bring down the prices you've spoken to and will hurt the global economy?
Mr. Al-Jubeir: No, I just -- I thought I was speaking English, because I said we are willing to sell oil to whoever wants to buy it. You can't physically just produce a barrel of oil and just drop it on a sidewalk.
Q You can offer it at a discount. Are you willing to offer it at a discount for people to buy your --
Mr. Al-Jubeir : We have said -- the prices are no longer posted prices. It's determined by the market. If the market feels there are adequate oil supplies, the market will put a discount on it. If the market feels that there's a shortage of oil production, it will put a premium on it. You can't just produce a barrel of oil and leave it on a sidewalk and say, "Come and pick it up."
Q Was there any mediation? There was talk about mediation between Washington and Damascus with regard to the withdrawal. And actually the Syrians rushed their withdrawal to finish by yesterday, to facilitate that mediation. Could you confirm that?
Mr. Al-Jubeir: The United Nations Security Council passed Resolution 1559. After the assassination of Prime Minister Rafiq Hariri, the Syrian government indicated to the United Nations that it would withdraw its forces in compliance with U.N. Security Council Resolution 1559. We welcomed that step, as did the world community.
The UN special envoy, Mr. Terje Larsen, went to Damascus several times and engaged the Syrians on this issue. And the Syrians gave him a timeline for when their withdrawal will take place. They have withdrawn most if not all, I believe, of their forces. That deadline was the end of April. We believe that the Syrians will have complied with the requirement of pulling out their military forces and their intelligence personnel from Lebanon by that time.
There is now an interim Lebanese government that is moving towards holding elections at the time that the elections were originally supposed to be scheduled, which is, I believe, the end of May.
And we see that Lebanon is moving in that direction. So I don't see where the mediation would come in. I think the issue is --
Q So you assume Syria has fulfilled its obligations so far?
Mr. Al-Jubeir: I believe -- I said that I believe that the Syrians have said they will complete the withdrawal by the end of the month. I believe that most, if not all, personnel will have been withdrawn. We certainly believe that all of them will be out of Lebanon by the end of this month, per the promise made by the Syrians --
Q Adel, with regard to the bilateral agreement on WTO, we know that you almost settled the tariff problem. Is there an announcement to be made during this visit?
Mr. Al-Jubeir: The two countries have come very, very close to reaching a bilateral agreement on trade. I believe that the issues that remain to be resolved involve technical matters that need toshould be resolved -- we expect to have resolved very shortly. We're not talking about major issues, we're talking about technical issues.
Q (Off mike.)
Mr. Al-Jubeir: I am not a negotiator, so I can't tell you.
One other issue I was going to mention to you early on is when I said that the two countries are determined to broaden and deepen and strengthen their relationship and to revitalize it so that it can be as strong, if not stronger, than it was in the last 60 years. In that vein, the two countries have agreed to set up a joint committee, that will be chaired by the foreign minister and the secretary of state, that will discuss various issues involving the bilateral relationship, and that will include participation from other departments with relevant interest in this matter. It will be a periodic dialogue, and the objective here is to make sure that we have clarity, that we have transparency, that we have an open dialogue, and that we have frank discussions on issues that benefit both of our countries and our people.