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Rice Begins Foreign Trip With Oil Prices High On Agenda

  • Andrew Tully

Rice speaks in Berlin with Amr Musa of the Arab League.

Rice speaks in Berlin with Amr Musa of the Arab League.

U.S. Secretary of State Condoleezza Rice has begun a foreign trip to discuss issues ranging from the Middle East peace process to next month's summit of the Group of Eight leading industrial countries.

Probably the most pressing issue on her agenda is what to do about the rising price of oil.

Rice's first stop is Berlin, to attend a conference on Palestinian security. She also will meet with German and other European officials for bilateral talks.

From Germany, Rice will fly to Kyoto, Japan, on June 26 to make preparations for next month's G8 summit in Lake Toya.

Then she'll spend June 28-29 in Seoul for discussions on the six-party talks on North Korea's nuclear program.

Finally, Rice will fly to Chengdu, China, on June 29 to express U.S. condolences over last month's deadly earthquake, which killed almost 70,000 people. She then will travel to Beijing to meet with senior Chinese officials on a variety of issues.

Important Stop

Rice's most important stop probably will be in Kyoto to map out how the G8 leaders will address the oil problem. Prices neared $140 a barrel on June 23 -- nearly twice the price of a year ago -- with no indication that they may come down anytime soon.

This comes despite a new promise by Saudi Arabia to increase production. The Saudis held a meeting of oil-producing and -consuming nations in Jiddah on June 22 and said it would raise oil production by 200,000 barrels a day starting next month. That followed a move last month to raise production by 300,000 barrels a day.

Many observers say that while the Saudi increase can be helpful in meeting rising demand, it ultimately makes the rest of the world even more dependent on oil.

Rice and her counterparts in the G8 -- from Britain, Canada, France, Germany, Italy, Japan, and Russia -- evidently understand that, says Steve Kretzmann, the founder and executive director of Oil Change International, a nonprofit organization dedicated to identifying alternative sources of energy.

'Sad Reality'

But Kretzmann tells RFE/RL that there's little the G-8 countries can do to drive down the cost of oil for now.

"There's not much that the G8 can do about the short term in oil prices -- it's sort of the sad reality," Kretzmann says. "However, the most helpful thing that the G8 could do would be to send a clear signal that we're going to do everything we can to reduce our reliance on oil and reduce our consumption [of] oil. And that includes, particularly, reducing and ending subsidies to oil and coal at the international level, which the G8 is actually considering in their meetings."

But ultimately the G8 leaders can merely demonstrate their own citizens' intent to cut back on oil consumption. Can that help drive down its price?

Yes, Kretzmann says, but only in the long term. The key, he says, is for the leaders of the chief oil-consuming countries to make their constituencies understand that the current price rise isn't just another phase -- or cycle -- in the ordinary rise and fall in the value of any commodity.

"I think that once the American people, the people around the world, get the clear signal that this is not another cycle, that we're seeing a clear upward trend -- once people get the signal, there's going to be a lot of things that kick in trying to reduce [oil] consumption around the world," Kretzmann says. "And I think that the sooner that folks with the G8 start to send that signal out, then the sooner we're all going to be in better shape [on oil prices]."

If nothing else, Kretzmann says, making that case convincingly would be a valuable achievement for this year's G8 summit.

Russia In Decline

The G8 has now grown from the G7, with the addition of Russia, itself an oil and gas powerhouse. RFE/RL asked Kretzmann if it could in any way help to bring relief to countries confronted with record oil prices.

Unfortunately, Kretzmann says, Russia already is producing oil at or near capacity.

"The reality is Russia's production is in decline, as is many, many oil producers', and there's not much Russia can do to pump more oil in the near future to alleviate prices," he says. "And there's not much many people can do about getting more oil out. The Saudis in theory could do a little bit more than they're doing, but I absolutely stress 'in theory.' I think the reality is that we're all going to have to get used to a pretty constrained [world supply] here, and that means upward pressure on prices. But, at the end of it, I think we're all going to be a whole lot better off with reduced reliance on oil."

Kretzmann agrees with many observers, including Saudi Oil Minister Ali al-Naimi, that financial speculation is contributing to oil's rising cost. But Kretzmann says it's impossible to say just how much of a role speculation may be playing, and Saudi Arabia itself is at least in part to blame.

According to Kretzmann, what drives speculation is that oil traders simply don't know how much oil leading oil-producing countries -- especially Saudi Arabia -- still have for future production. The only way to find out is if these countries make that information public.

But Kretzmann says these governments have declined to open their oil fields to international scrutiny. As a result, he says, the speculation persists, contributing to the rising price of oil.