U.S.-Saudi
Energy Relations in the Global
Perspective
Alan
P. Larson, Under Secretary for
Economic, Business, and Agricultural
Affairs
Remarks
at Conference Sponsored by the Council
on Foreign Relations; the Petroleum
Industry Research Foundation, Inc.;
and the U.S.-Saudi Arabian Business
Council
Washington, DC
April
22, 2002
Mr.
Larson: Thank you Al (DeCrane,
Chairman of the U.S.-Saudi Arabian
Business Council). I welcome the
opportunity to be with you this
morning.
While
it is always a challenge to speak on
the complicated topic of energy before
so many of you, who do this every day,
all day, it is all the more
challenging when you are speaking
after Saudi Arabia's oil minister and
the U.S. Secretary of Energy on a
panel that includes Senator Bingaman.
As
you know, recent events in the Middle
East have taken an enormous toll:
human lives lost, families shattered,
economic activity frozen and mounting
humanitarian distress. Israelis and
Palestinians alike deserve lives free
from fear of violence with the hope
for a stable future and a chance for
economic prosperity.
President
Bush recently offered a powerful
statement of America's determination
to fight terrorism, end the violence,
and move toward peace. His vision
entailed Israeli and Palestinian
states living side-by-side in peace
and security. The President called on
the Palestinians to reject violence
and terrorism as a means to solve the
conflict, and for the Israelis to
bring an end to the current military
operations.
Crown
Prince Abdullah's peace initiative
represents a courageous vision, and is
a concrete example of the kind of Arab
partnership of which President Bush
spoke. We look forward to working with
Saudi Arabia to realize this vision.
So
a special welcome to my good friend
Minister Naimi.
Given
the events of the last few weeks, I
cannot think of a more timely and
appropriate topic for the U.S.-Saudi
Business Council, the Petroleum
Industry Research Foundation and the
Council on Foreign Relations. Iraq's
futile attempt to damage the world
economy -- its third attempt in less
than two years -- reminds us that we
live in a volatile and unpredictable
world.
The
National Energy Policy Framework
As
one of its first priorities upon
entering office, the Bush
Administration addressed, and
continues to place the highest
priority on, the energy challenges
facing our country and the world.
Almost
a year ago, the Administration issued
the National Energy Policy report, a
comprehensive and balanced look at the
energy issues facing the U.S. and the
world, along with recommendations for
dealing with these challenges.
I
want to share with you some of the
international aspects of this report,
particularly those dealing with Saudi
Arabia and our shared energy
interests.
Our
Shared Interest in Market Stability
and Reliability
The
United States and Saudi Arabia have
shared interests in the stability and
reliability of the international oil
market.
The
National Energy Policy highlights a
number of policies that Saudi Arabia
and the United States have taken to
improve the stability and reliability
of the oil market.
Saudi
Arabia, the world's largest oil
exporter, has been a linchpin of
supply reliability to world oil
markets. Saudi Arabia holds the
world's largest oil reserves, and its
oil policy reflects its own economic
interests, which include maintaining
the viability of oil as the world's
leading fuel source well into the
future.
As
our National Energy Report makes
clear, Saudi Arabia has pursued a
policy of investing in spare oil
production capacity, and diversifying
its export routes to both of its
coasts. These investments help make
Saudi Arabia a reliable oil supplier,
and can be likened to an insurance
policy for the world economy.
The
consequence of these enormous
investments by the Kingdom of Saudi
Arabia is that the Kingdom can
credibly assure markets that it has
the capacity to mitigate supply
disruptions in any region. And, as
recent events in the Western
Hemisphere have shown, disruptions can
occur in any region.
The
United States, much like Saudi Arabia,
is also a central market participant
in the global energy picture.
U.S.
influence in world energy markets is
substantial in terms of production and
consumption.
First,
the U.S. is itself a leading energy
producer. The United States produced
72 of the 98 quadrillion BTUs of
energy that we consumed in 1999.
The
United States is the world's second
largest natural gas producer and its
third largest oil producer.
And
we are virtually self-sufficient in
all energy resources except oil, of
which we import 52 percent of our
needs. In natural gas, we import just
over 15 percent of our needs,
primarily from Canada.
About
half of our imported oil comes from
just four countries, often led by
Saudi Arabia. (Canada, Saudi Arabia,
Venezuela, Mexico.)
So
given our large energy sector,
measures to enhance U.S. energy
security must begin at home, of
course, and this is an agenda we are
vigorously pursuing on Capitol Hill.
You
are no doubt familiar with our
longstanding policy that market forces
should set prices for oil in the
global market. The National Energy
Policy recognizes that the first step
toward a sound and balanced
international energy policy is to use
our own capability to produce, process
and transport the energy resources we
need in an efficient and
environmentally sustained manner.
Progress
has been made in improving exploration
and production technology. And we know
that we must also squarely address the
issue of efficiency, and conservation.
We have shifted to more efficient
technologies. U.S. energy intensity
(the amount of energy it takes to
produce a dollar of GDP) has declined
by 40 percent since 1970. We are
working to assure that much more can
be achieved in this area.
Just
as the Saudis, as the world's largest
oil producer, have invested in spare
capacity, the U.S., as the largest
importer, has borne the cost of major
investments in strategic oil stocks.
And our National Energy Policy report
underlines our policy that these are
to be used in case of actual, physical
shortfall.
The
United States has also made the
decision to fill the Strategic
Petroleum Reserve to its 700 million
barrel capacity, in a deliberate and
cost effective manner. In fact, the
fill rate is currently close to
150,000 b/d.
Our
International Energy Agency allies
also maintain stocks. Together,
consuming governments are ready to do
their part to provide stability and
reliability to the market, in the
event of a major supply disruption.
Both
producers and consumers know that the
use of oil as a political weapon is
unacceptable, and the lesson from
instances in the past is clear, it
does not work. We appreciate the
recent statements by many OPEC
countries that reject the use of oil
as a political weapon.
Each
country has its national interest, yet
each country has interests that
coincide and which are complimentary.
Maintaining stability in world oil
markets is just one of those
interests.
Our
Shared Interest in Enhanced Dialogue
In
a global energy market, U.S. energy
security cannot be achieved in
isolation from the rest of the world.
We
enhance our own global security by
working cooperatively with key
countries to expand the sources and
types of global energy supplies.
The
National Energy Policy underscores the
need to deepen our dialogue with major
oil producers on information related
to oil markets. This is consistent
with Crown Prince Abdullah's call for
deepened producer-consumer
understanding.
This
enhanced dialogue with oil producers
can contribute to a well-functioning
oil market. Together, we can improve
the transparency, timeliness, and
accuracy of the data that guide global
oil markets. We all benefit from a
better understanding of changes in
demand and timely adjustments of
supply.
Our
Shared Interest in Open Energy Sectors
The
United States welcomes the benefits
and contributions that large
international investments have made in
our energy sector. Both producers and
consumers benefit from ensuring that
global energy supplies and
infrastructure are sufficient and
flexible to meet growing demand.
Many
people would be surprised that a
European company is the largest energy
producer in the U.S., that a Russian
firm has acquired one of our most
recognized name-brands, Getty, and its
robust retailer network. Saudi Arabia,
Venezuela, and other major oil
producers hold significant refinery
and distribution ventures here.
U.S.
openness to foreign investment has
made us one of the world's most
competitive economies, and has
provided us with capital and jobs for
our people. Investments by major
producers also enhance our security of
supply and their security of demand.
The
United States has long been open to
these major foreign energy
investments. Saudi Arabia is now
moving to open its own economy to more
foreign investment.
The
Crown Prince's Natural Gas Initiative
was itself an important step forward
in reinforcing and deepening the ties
between oil producers and oil
consumers. His visionary initiative is
not only important for Saudi Arabia's
economic development, but it is being
watched by many other countries
considering opening their own energy
sectors.
The
United States fully supports the Crown
Prince's initiative. A prompt
conclusion of ongoing negotiations
will reinforce a message of confidence
in Saudi Arabia's investment
climate, and be a strong step forward
in bolstering the commercial ties that
bind Saudi Arabia with its many
friends.
Our
Shared Interest in Saudi WTO Accession
Given
our close ties to Saudi Arabia and the
important role it plays in the
region's economy, we are eager to see
Saudi Arabia take its place in the
world community of trading nations by
joining the World Trade Organization.
The
types of policy measures Saudi
Arabia -- and all other governments --
make to join the WTO make for stronger
economies. They lead to enhanced trade
and investment and to job creation.
The
U.S. strongly supports and stands
ready to assist Saudi Arabia in its
bid to join WTO.
Conclusion
Our
longstanding and productive energy
relationship with Saudi Arabia is a
good example of every
producer-consumer dialogue that is
rooted in common interests, and
deepened by market forces. The United
States remains committed to this
energy partnership. Together, the
world's two leading energy economies
can take the steps that are needed to
advance stability and reliability in
the oil market, and to support the
growth of the world economy and our
respective national economies.
Source:
U.S.
State Department
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