The U.S. energy secretary said Saturday that insufficient oil production, not financial speculation, was driving soaring crude prices, the AP reported.
Secretary Samuel Bodman's comments on the eve of an energy summit in the Saudi port city of Jiddah set the stage for a showdown between the U.S. and conference host Saudi Arabia, which has largely blamed speculation in the oil markets for record prices.
The U.S. and many other Western nations have put increasing pressure on Saudi Arabia, the world's top oil exporter, to increase production. Saudi officials have been hesitant to do so, arguing that the market is not suffering from a shortage of supply.
Bodman disputed that assertion Saturday, saying oil production has not kept pace with growing demand, especially from developing countries like China and India.
"Market fundamentals show us that production has not kept pace with growing demand for oil, resulting in increasing prices and increasingly volatile prices," Bodman told reporters. "There is no evidence that we can find that speculators are driving futures prices" for oil.
He said commodities markets have experienced a huge influx of money from financial investors in recent years, but they have been following the market upward rather than driving the increase in the price of oil, which closed near $135 on Friday.
Saudi Arabia called the unusual meeting in Jiddah between oil producing and consuming nations as a way to show that it was not deaf to international cries that high oil prices have caused social and economic turmoil.
Saudi assistant oil minister, Prince Abdulaziz bin Salman, told a news conference that the delegates were "congregating to achieve results" and to try to draw "a collective way forward for how to attend to this situation."
"This situation as we see it today as it exists needs everybody's attention simply because it no longer is a luxury to talk about it or ... to keep bouncing back and forth blame," he added.
Abdulaziz said the decision of the kingdom to hold the meeting comes from a feeling of "enough is enough ... Let's sit as professionals committed to bringing remedies to this situation."
Abdulaziz reiterated that the kingdom is ready to meet demand from its customers and that it seeks stable oil prices.
He said it would be "wrong" to judge the success of the meeting by prices that oil registers the day after.
Many countries around the world have experienced social unrest by populations angry that rising fuel prices have driven significant increases in the cost of food and other basic goods.
The Gulf nation also has become increasingly concerned that record oil prices could hinder growth in the U.S. and other major industrialized economies, potentially leading to a decline in oil demand and a sharp drop-off in prices.
Saudi Arabia announced in May that it had increased oil production by 300,000 barrels per day and is expected to announce an additional increase of at least 200,000 barrels in Jiddah. Saudi officials have yet to officially confirm the latter increase, but the production jump did little to stem the run up in prices.
Bodman said that every 1 percent increase in the demand for oil requires a 20 percent rise in price to balance the market. Demand in China, India and the Middle East has been soaring in recent years as the countries consume more energy to fuel economic growth.
Rising demand in the developing world has coincided with historically low levels of spare oil production capacity, which fell below 2 million barrels per day among OPEC countries in May for the first time since the third quarter of 2006, according to the International Energy Agency.
Bodman made clear that the responsibility for reducing oil prices did not simply fall on the shoulders of producing nations, saying consuming countries must increase energy efficiency and invest in the development of alternative fuels. But he saved his strongest words for oil producers like Saudi Arabia, who he said must step up long-term investment in production and spare capacity.
"The incentive (for investing) is simply reasonable prices so that we're not faced with having to drop everything and race to Jiddah for a meeting that was called on a week's notice," said Bodman.
Saudi Arabia is completing a $50 billion plan to increase capacity to 12.5 million barrels a day from around 10.7 million barrels currently but has signaled it would not go beyond that. The kingdom currently produces about 9.5 million barrels per day.