Schumer Calls For Saudis To Increase Oil Production

February 26, 2012 Updated Feb 26, 2012 at 4:01 PM EDT

By WKBW News

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Schumer Calls For Saudis To Increase Oil Production

February 26, 2012 Updated Feb 26, 2012 at 4:01 PM EDT

WASHINGTON, D.C. ( release ) U.S. Senator Charles E. Schumer Sunday called on the U.S. State Department to press the government of Saudi Arabia to publicly and unequivocally promise to increase its oil production to compensate for any Iranian attempts to embargo oil and upset world markets. In light of Iran’s decision to cut off oil exports to France and the United Kingdom, and the threat to further expand its embargo oil exports, Schumer called for the State Department to press the Saudis to make explicit commitments to make up any losses of Iranian oil to the world market, to help reduce already sky-rocketing gas prices.

With the average price of gas at $4.02 in New York City, $3.99 on Long Island, $3.94 in New York State, and $3.69 per gallon nationally – almost exactly double 2009’s average of $1.86 – continued high gas prices have the potential to dramatically drag down the US economic recovery and put a severe strain on American families’ budgets. Rising fuel prices are directly linked to the global energy market, particularly Iran’s recent efforts to manipulate oil prices. While Iran produces roughly 2.2 million barrels of oil for export, current production in Saudi Arabia is at approximately 10 million barrels, 2.5 million below its 12.5 million barrel capacity. Schumer called on the State Department to press the Saudis to publicly commit to meet their capacity potential to offset any current or future Iranian manipulation and bring down gas prices, worldwide.

“While Iran plays games with oil production to punish the international community for holding them accountable for their rush to develop nuclear weapons, Saudi Arabia has the capacity to blunt Iran’s influence by increasing its production levels to capacity,” said Schumer. “If there is one thing that the United States and Saudi Arabia have in common, it’s the understanding that Iran is a destabilizing influence in the Middle East and the world. We can calm markets and lower gas prices, while at the same time curtailing Iranian influence, by increasing Saudi production. I am urging the State Department to work with the Saudi’s and press them to bring their oil production to capacity to replace Iranian losses.”

American consumers are again facing rising gasoline prices. In New York City, gas prices as of Sunday were $4.02 per gallon according to American Automobile Association (AAA), $3.94 in New York State, $3.99 on Long Island, and $3.69 nationally – which is almost exactly double 2009’s average of $1.86 a gallon and the highest prices the US has ever seen at this time of year. The price of diesel fuel has also increased, reaching $4.02 a gallon, nationally. The price of diesel fuel not only affects truck drivers, but it pushes food and transportation costs higher, hitting consumers not only at the pump, but at the grocery store as well. The combined effect of these energy prices has the potential to significantly undercut the U.S. economic recovery. These skyrocketing fuel prices are directly linked to the global energy market, particularly Iran’s recent efforts to manipulate oil prices.

Despite sky-rocketing gas prices, Saudi Arabia is not currently producing oil at its full capacity. Saudi Arabia, according to the U.S. Energy Information Administration, is averaging 10 million barrels of oil per day – 2.5 million barrels short of their approximate 12.5 million barrel capacity. These lower production levels have a negative impact on global markets. When paired with recent actions by Iran in halting sales to French and U.K. companies and threats to stop sales to countries such as Italy, already fragile markets are being further devastated. These shifts are now hitting Americans at the pump, reverberating throughout the rest of our economy, and threatening the US recovery. Saudi Arabia, by increasing production to capacity levels, has the ability to replace lost Iranian output.

Schumer also urged the State Department to press the Saudi’s to act unilaterally, if necessary, to ensure that OPEC nations like Venezuela and Iran do not attempt to block further exports. Saudi Arabia has in the past acted without OPEC. Last June, when Saudi Arabia announced that it would increase its oil output by 1.5 million barrels, the price of a gallon of gas dropped 6.6 cents from the week prior to the announcement. If the same pattern holds from last June, a 2.5 barrel increase could conceivable lead to an 11 cent drop in the price of a gallon of gasoline.

In his letter to Secretary Clinton, Schumer urged the State Department to work with the government of Saudi Arabia to increase their oil production in order compensate for the loss of oil from Iran. Schumer said that by increasing production to capacity levels, Saudi Arabia could calm oil markets, promote the shared goal of reducing Iranian influence, and ultimately reduce prices at the pump for Americans. Schumer noted that Saudi Arabia’s action would send a strong message to the Iranian government that its attempts to manipulate the oil markets in response to sanctions would be ineffective.

A copy of Schumer’s letter is below.

Dear Secretary Clinton:

As you are aware, due to the worry turmoil in the Middle East and its impacts on oil supplies, American consumers are facing rising gasoline prices, with the national average price of a gallon of regular gas at $3.69. This is nearly double 2009’s average of $1.86 a gallon and the highest prices we have ever seen for this time of year. The price of diesel fuel has also increased reaching $4.02 a gallon. The price of diesel fuel not only affects truck drivers, but it pushes food and transportation costs higher for consumers, too. The combined effect of these energy price hikes drags down our economy, which can undercut our recovery. These skyrocketing fuel prices are directly linked to the global energy market, particularly Iran’s recent efforts to manipulate oil prices and the worry of impacts on supply from an escalation of regional hostilities. To address this situation, I urge the State Department to work with government of Saudi Arabia to increase its oil production, as they are currently producing well under their capacity.

Saudi Arabia, according to the U.S. Energy Information Administration, is averaging around 10 million barrels of oil per day. This is 2.5 million barrels short of their approximately 12.5 million barrel capacity. These lower production levels have a negative impact on global markets. When paired with recent actions by Iran in halting sales to French and U.K. companies, and threatening to stop sales to countries such as Italy, already fragile markets are unduly roiled. These market shifts are now hitting Americans at the pump, reverberating throughout the rest of our economy, and threatening our recovery.

I remain appreciative of the administration’s efforts to hedge the price of oil by releasing 30 million barrels from the Strategic Petroleum Reserve this past June, and coordinating with the International Energy Agency in the release of an Additional 30 million barrels. Recent unprecedented market spikes and international provocation warrant equally decisive action by the State Department in hedging the current prices. I urge the State Department to work with government of Saudi Arabia to increase its oil production to its actual capacity of 12.5 million barrels and help stabilize markets.

Thank you for your consideration and attention to this important matter.