Motorists Won’t Get Quick Relief on Fuel Prices

Despite a pledge from Saudi Arabia on Sunday to boost production to curb soaring worldwide oil prices, California motorists probably won’t see relief at the pump anytime soon.

The promise from the world’s largest oil producer, however, is still good news for big petroleum consumers such as the United States and California because it could ease market concerns about tight oil supplies and the reliability of Iraqi exports.

“Some of the anxiety will be tempered if there are more physical barrels in the market, and that’s clearly the intention here,” said Daniel Yergin, a worldwide oil expert and chairman of Cambridge Energy Research Associates. “Just getting more barrels into the market will have an impact.”

Saudi Arabia said it would increase its daily output by 600,000 barrels, or 7%, to 9.1 millions of barrels a day in June, according to Energy Secretary Spencer Abraham, who met with Saudi Oil Minister Ali Ibrahim Naimi on Sunday in Amsterdam. That’s a slightly bigger increase than the Saudis announced Friday.

The Saudi oil minister “also stated that going forward, they will meet all requests up to their full capacity of 10.5 million barrels a day,” Abraham said. “I think this was a very important comment on his part.”

Whatever happens, though, probably will have little immediate effect on U.S. gasoline prices, which have recently hit record highs nationwide and in California.

Any extra oil Saudi Arabia produces won’t come out of the ground until June, and then it would have a six-week voyage by tanker to U.S. ports. What’s more, the wholesale gasoline and diesel prices that have helped boost pump prices have been soaring separately from crude oil because of abnormally low fuel stocks heading into the nation’s summer driving season.

Those conditions, made worse by a relentless acceleration in demand for gasoline and diesel, pushed the nationwide average cost of self-serve regular to $2.07 a gallon Friday, up 14 cents in the last week, according to the latest weekly survey from Trilby Lundberg’s research firm. San Diego had the most expensive gasoline Friday at $2.36 a gallon.

A worldwide surge in oil demand has stretched global production and pushed crude prices to record highs as well. Sustained high prices are threatening growing economies and have led the U.S., Europe and others to pressure the Organization of the Petroleum Exporting Countries to increase oil production.

Saudi Arabia announced plans Friday to increase its own production even further above its established quota and also called on OPEC to lift supply limits by 2 million to 2.5 million barrels a day. Over the weekend, however, OPEC announced that it would wait to consider the Saudi proposal at its June 3 meeting in Beirut.

Crude oil prices are being driven higher by genuine worries about unexpectedly strong demand outstripping world oil production. But some experts believe anxiety over terrorism and the situation in Iraq accounts for as much as $10 of the current price of crude oil, which hit a record high close of $41.55 a barrel in New York a week ago.

On Friday, after Saudi Arabia first said it would increase its output, the price of benchmark crude slipped 87 cents to close at $39.93 a barrel on the New York Mercantile Exchange, marking the first close under $40 in eight sessions.

In early trading today on Asian markets, oil prices fell in response to Saudi Arabia’s pledge.

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Bloomberg News was used in compiling this report.