US: Blunted Oil Leverage With Saudi Arabia

Surging prices, along with a weak dollar and an oil-thirsty Asia, have blunted America's leverage with Saudi Arabia, a key oil producer and helped sour the two nations' relationship, the Los Angeles Times said on Sunday.

Gone were the days when Saudi Arabia worked with its dominant customer, the United States, to keep world oil markets stable and advance common political goals, the newspaper claimed.

This could be demonstrated by the surging price of oil, which soared more than 10 U.S. dollars a barrel Friday to a record-high 138.54 dollars, the paper said.

The weakening of the economic relationship comes when the vital U.S.-Saudi security relationship also has been fraying, the paper said.

In the 1980s, the U.S.-Saudi bond that kept oil prices low was credited with helping weaken the Soviet Union during the waning days of the Cold War. And it helped keep markets stable after Iraq's 1990 invasion of Kuwait.

But the Saudi government has been dismayed by the consequences of the war in Iraq and by what it sees as a weak Bush administration commitment to the Palestinians, the paper said.

The relationship is shaping up as a political issue for the fall campaign, certainly among congressional candidates and perhaps among presidential candidates, the paper said.

With a 20-million-barrel-per-day habit, the U.S. remains the world's largest oil customer, even though its daily consumption over the years has dropped from one-third of total daily production to one-fourth, according to the paper.

Many believe the Saudis have grown more interested in conserving their supplies for later generations, and confident that if U.S. consumption drops, the economies of Asian countries will take up the slack, the paper noted.