PO hits the MSM in the comix today. At this time (8:30 CDT) today's comic wasn't on the website, but check out Opus in your Sunday paper. Regards, DIY

From AP:

Hungry ethanol plants consume 20% of corn crop

Ethanol production in the United States is growing so quickly that, for the first time, farmers expect to sell as much corn this year to ethanol plants as they do overseas.

"It's the most stunning development in agricultural markets today - I can't think of anything else quite like this," says Keith Collins, the U.S. Agriculture Department's chief economist.

Electrical and Oil Problems in the Dominican Republic

As was generally expected, after the artificial good days that led into the election, power blackouts have returned with a vengeance. The real truth behind the spate of blackouts is financial. Power generators are supplying lesser amounts of electricity as they await payments on arrears owed by the government-run Edesur and Edenorte power distribution companies. Power outages are now reportedly lasting for approximately 10 hours at a stretch. El Caribe reports that the blackouts have not worsened because hydroelectric power generators are supplying 307 megawatts to the national grid. According to the grid's coordinating office, there was a generation supply deficit of 31% of the demand.

Hoy newspaper also reports that propane gas supply problems have similarly returned after a period of respite during the elections. The Dominican Petroleum Refinery dispatches have slowed again, as there have been delays in the arrival of tankers due to payment arrears.

Latin American Presidents Agree on Sweeping Energy Plan

LA ROMANA, Dominican Republic (AP) -- Seeking relief from soaring energy prices and dependence on foreign oil, leaders of 10 Latin American nations agreed Saturday to push forward a sweeping energy plan that includes the construction of a liquefied natural gas plant, a hydroelectric dam and a pipeline stretching from Mexico to Panama.

But the most important details of the energy project were postponed, such as where to build a proposed $6.5 billion refinery that would provide up to 360,000 barrels of oil a day.

Guatemala and Panama were the leading contenders for the multinational refinery, billed as the largest project in Latin America since the Panama Canal.

"At this meeting there is not going to be a decision on choosing a location. That is a decision that will go after the investments are made," Mexican President Vincente Fox told reporters Saturday before a presentation with Dominican President Leonel Fernandez.

The refinery project is expected to be funded by private investors who have not been named. Those investors will choose the refinery's location under an agreement signed by the leaders Saturday, officials said.

Fox said the refinery, to which Mexico would provide about two-thirds of the supply, will help Central American countries struggling under the soaring cost of oil.

"For the first time, they will have competitive energy prices like we have in Mexico," Fox said.

Mexican Energy Secretary Fernando Canales has said the refinery would provide oil at $8 less a barrel than open-market prices.

Presidents and foreign ministers from the 10 countries met for the summit's second day at the Casa de Campo resort in La Romana, 70 miles east of the capital, Santo Domingo.

The summit included representatives from Mexico, Colombia, Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, Panama and the Dominican Republic.

Yesterday there was a pretty good question about what people's earned return on investment was for peak oil activism. I guess I'm different from most of the folks, I hope to get financial advantages from my activism as well as the personal reward of helping our society adjust to peak oil.
  I became interested in the topic in the early 1980's when I read a very interesting article/book published by the Bureau of Economic Geology titled "Potential for Additional Oil Recovery in Texas". I can't remember the authors, but I do recall the premise that over 95% of the oil in Texas had been discovered but only about 20% had been produced. This was because of reservoir charictaristics(I'm a consistently bad speller), early production practices that left oil stranded in old fields, and early abandonment due to economic conditions. I started professionally to specialise in a particular type of structure-salt domes-and put together several prospects and got them drilled.
  The fall in oil prices of 1986(from $28.00/bbl to $12/bbl) finally squeezed me out of landwork until last year. But I stayed interested and worked a little in the mean time.
   There is still lots of oil out there that can and will be produced.But I've realised that this phenomina is true worldwide. And since then I've become interested in global warming and the carbon dioxide problem.
   A huge problem in the US oil and gas industry is the retirement and death of the men with experience and education necessary to develop and produce old oil fields. I'm 54, but even the guys of my age group in the oil patch never got the experience to mess with old fields.
  So I guess I'm more of an optomist than many TOD contributors. I believe that US production can be increased and the plateau of peak oil extended a long time. But our country is nuts not to develop alternatives as quickly as possible and to conserve, the only sure thing in the energy industry. We can't continue to destroy the earth, and we need to be personally responsible because exhortations don't work nearly as well as examples.What's leftis going to go a lot quicker than the original production because there are a lot more consumers.  

From the Baltimore Sun:

Clerks taking brunt of gas price rage

Drivers vent anger at pump with misplaced blame - yelling at cashiers, refusing to pay

LOS ANGELES- Tempers are rising along with gas prices. Gas stations across the country report that drivers are taking out their gas rage against big oil by yelling at clerks and cashiers and sometimes driving off without paying.

As I've probably mentioned before, I don't drive much, but once a year, I do drive halfway across the country to visit with friends.  I've been doing it for more than 15 years now, and it was interesting to notice the changes this year.

For the first time, there were large signs on the pumps saying things like, "Pay before you pump!" "Smile, you're on hidden camera," and "Pay first!  Daytime, too!"

In Michigan, I stayed in the same hotel I've been staying at for over ten years.  Little had changed...except that every light fixture now held a power compact flourescent bulb.  In the halls, in the rooms, in the lamps, you name it.  It wasn't like that last year.

Unfortunately, their energy savings was offset by the fact that they had the heat on in the hallways.  Even thought was 93F.  Air-conditioning on in the rooms, and the window open in the hallway...with heat pouring from the floor register.  Good gravy.

And if anyone's wondering, my automatic transmission Toyota Corolla got almost 39 mpg.  Even though I was a bit of a leadfoot, and had heavy headwinds through at part of the trip.  

Hirsch Report Follow Up
Roger Bezdek on the Hirsch followup


Jason Brenno & Roger Bezdek having a round table discussion...
Bezdek comment below:

The near-term problem that we are facing is indeed a liquid fuels rather than a quote energy crisis in general. How we react and deal with this near-term liquid fuels problem will determine how we resolve our energy problems in the longer term. But for the next decade or two at least, the primary problem is the demand for liquid fuel which is simply outstripping the supply at available prices. But, of course, what is happening prices are increasing very rapidly and least of all price volatility has been increasing. So, yes what we face immediately and for the next decade or two at least is a serious liquid fuels problem.

-- Robert Bezdek


Here is the full report...
Economic Impacts of Liquid Fuel Mitigation Options

Interesting article in July issue of Car & Driver on ethanol. Two (for me) new points: (1) Ethanol as a replacement for MTBE: Oxygenated fuel to meet EPA clean air standards worked for carburated engines - the 2% O2 content "tricked" the fuel system to burn leaner. "However, the feedback-fuel-metering systems, which self-adjust to operate at a fixed mixture regardless of fuel composition, became the norm roughly 20 years ago... Today, as any engine engineer will testify, the rule has virtually no pollution benefit and has become nothing more than a backdoor for the ethanol industry and corn farmers." (2)Car & Driver did a test run of a 2007 Chevy Tahoe and showed it got 30% worse mileage with E85 than regular gasoline - a number in line with the 31.5% decrement of another SUV by cars.com. Why then are we being bombarded with TV ads for flex-fuel SUVs by the Big Three? For CAFE purposes, the Feds only count the 15% of gasoline content of E85, magically producing a seven-fold increase in E85 mpg. The official CAFE number is an average of the inflated E85 number and the 100% gasoline number. C&D calculates that the flex-fuel Tahoe's CAFE rating jumped from the 20.1 mpg to 33.3 mpg, blowing through the 22.2 CAFE mandate. They did some calculations showing that the E85 loophole saved GM more than $200 million in CAFE fines. With ethanol production "by law" (the Energy Policy Act of 2005) cranking to 7.5 billion gallons in 2012, and SUV CAFE fuel economy magically improved 66% (despite the fact E85 results in a 30% decrease in mpg)we now understand the ad blitz. Perchance (yet another) government conspiracy to benumb the public and keep the life blood of the US auto industry alive-and-cranking with the beloved SUV?

Tehran warns of fuel disruptions
Empty rhetoric - or will Westexas shortly be celebrating "Yergin Day" ?

this throws up red flags to me.

On Monday, June 19, about 4,000 government workers representing more than 50 federal agencies from the State Department to the Commodity Futures Trading Commission will say goodbye to their families and set off for dozens of classified emergency facilities stretching from the Maryland and Virginia suburbs to the foothills of the Alleghenies. They will take to the bunkers in an "evacuation" that my sources describe as the largest "continuity of government" exercise ever conducted, a drill intended to prepare the U.S. government for an event even more catastrophic than the Sept. 11, 2001, attacks.

http://www.washingtonpost.com/wp-dyn/content/article/2006/06/02/AR2006060201410.html

Hello,
I was reminded by another poster here that TOD is about oil and that war is politics. Here it is better to focus on OIL and that political issues are push at best. These were not the words used but this is the best short summery I could come up with. This leads me to an event of last weekend.

My love and I attended a Memorial Day party (it was the day before but it is the thought that counts) at one of her relatives house. They have an old farmhouse that is not in the best of shape and is way too large and there energy bills are extreme at best. That is a different matter so to get my mind back on focus here.

As with most parties the men sort of went off for man talk and the ladies grouped together for girl talk. We had lots of beer, burgers and hotdogs, the normal stuff though for once someone got the dark brown mustard I like. So we guys were sitting on the porch having beers and later our host broke out some cigars.

Here I was meeting most of these people for the first time. We did the guy talk thing and all was well. Talking about construction, what work we did, motorcycles, cars, trucks and at some point I realized that I completely tuned out. For me the construction stuff is only shop talk while talk of Ford F-250's goes off the charts, since I have one and use it for construction.

That truck is the bane of my existence now. I have to charge customers more money to cover my expenses. As a result the work is all but gone. I have economized as much as possible. I stay at the jobs I still have longer and only get materials when the material supplier is in my path to or from a job. I make my own lunch and eat at whatever site I'm on. I can't find a car or more efficient truck that will tow concrete mixers, numerous ladders, mountains of tools and tons of material. So to fill up my truck I have to pay nearly $140.00 and depending on loads and distances I have to do this around six times a month.

So here I was listening to this guy's story about being a corrections officer and how he drives his F-250 to and from work over 100 miles round trip, takes vacations all the time, is building an addition on his home and it started to depress me even more. I could tell by his tone that he was military minded and had a violent disposition. I made the best of it and endured.

The next fellow was a tail boom operator in the NG. He told me all about how his plane could refuel a fighter in only moments. Part of me loves planes for some reason but when he explained that it took over two tons of fuel for his plane just to taxi and get down the runway. For some reason my mind flipped to this site TOD. I could see all of the linearization's going down into the abyss.

Our host is a rather interesting man. He works for a local school and seems to understand the bigger picture. He was busy hosting the party so we didn't talk that much. At some point one of the guys asked me about my story. It didn't seem like I impressed them much at all. I was just another bathroom contractor looking for projects to do. The subject at some point got to be about inflation and fuel.

This is a topic I know a great deal about. I can see that fuel prices are going up by looking at those numbers changing at light speed on the gas pump.  Since I read TOD and understand that PO is quite real I was able to break it to them that the F-250 is a work truck, not a pleasure vehicle. Sure enough the subject swung around to ethanol. Here I realized that soil is the golden key to our ability to eat. Here we were sitting at a farmhouse with no crops.

Shortly after mentioning that all the alternates required fossil inputs the correction officer guy told me that "WE" (meaning those guys) don't talk politics here and that, "It's just not done!" I had no intention of spoiling the day and felt that I addressed matters delicately. At no point did I tell him that when he talked about breaking heads at the jail that he essentially was talking about the politics of violence. In any other setting I would not associate with this man. When men go around gloating about the rush they get from bashing skulls of prisoners I consider that a negative person.

He lives a lifestyle based on group-think and domination. Forcing others to obey his edicts is part of his training and his training goes with him even to the Memorial Day party. This is not about him but more about what people are becoming. They say that birds of a feather flock together. I could see the connection between the taskmaster and the military man yet I could not see the connection to the host. I somehow sensed he was longing for acceptance from those that he met along the way. Basically he offered a place for the others to get away from their families and talk shit (and all that that entails).

Later on the men and ladies cam back together (the party was pretty much breaking up) and we conversed as a group. Apparently all of the women were talking about 9-11 and one of them asked me point blank about building 7. I explained that it did have damage but that the owner stated, "There was just such a loss of life and we decided to PULL the building." The next question from them was about alternative energy and required an opinion based response. I don't recall the exact words that I said but the basic opinion is that if it is not too late already then it is so close that you can't even fit a hair between the defining moments.

Prison man told me that what I was suggesting was complete BS and that he warned me before that politics was unacceptable conversation matter. At this point I was discussing depletion rates and those are physical facts not politics. I didn't pin any blame for it on Democrats or Republicans. The ladies were quite interested in the topic and seem to realize that 9-11 has something to do with oil. The guard guy became agitated and proceeded to tell me off and then state, "That he was not going to tolerate a conspiracy theory conversation" , "Come on lets go!"

So when you boil the whole thing down it comes down to group-think and denial. I can't talk about most things that I think about to most people. I'm a nut to suggest that oil is in depletion or darn close to it. This is a generalization mind you but it seems that most people are not capable of hearing common sense. Most people are incapable of agreeing to disagree. Most people are terrified at this point since it would seem that life in the US is all the more harsh.

The host talked to me about things openly after his friends left. He agreed that the lion share of us, are living a lie. He told me about his attempt to add solar to his home but he was unable to afford the $4500.00 cost per panel. He knows that the hardest of times are just around the bend of the road of life.

On the ride home my GF and I talked about things but she lives with me and knows about what I read here and in other places. She is seeing the building rage of the general population. For those of you that have the money please realize that the people on the bottom feel it first and hardest. Eventually this will spread upward. Those with the most to loose will cling tighter and even more citizens will be disenfranchised.

My view it that PO and the politics guiding it are interconnected. Politics is about control over resources. To talk about energy and mute the politics part is impossible. To talk about how we can brace for the impact of the rising tide that is PO is political in all ways. Moving to ethanol is a control of recourses and is thusly political. It would require discussion, planning and possibly voting. Most people here will not have a choice in the matter or even a say. This is because politicians have been working hard to secure there futures based on our sheep like qualities. We have been muted by corporations and lawyers.

Follow along with this story:
I have some money and I choose to by some land. I'm into subsistence living and choose to build a small but efficient log home from materials found on my land. I trade for the glass that is to be my windows and have enough space to operate a small farm. I sever all of my connections to the rest of the world and live the good life. I survive because I have a understanding of nature and treat the land as though it were the meaning of life. At some point the Government shows up to collect taxes. I tell them that I paid for the place in cash that was already taxed. I don't have a classic job since I don't need one. Then they arrest me and take away my land.

If I choose to barricade myself they lay siege for a while. Eventually they get board with waiting and do a full assault.  They shoot me dead since I'm within my constitutional rights and baring arms and refuse to pay their taxes. Now the government sells the land and I'm dead because I was for a short while a truly free human being.

So my killers are political and I didn't want to get involved with politics and that is what politics is control of resources. I was a resource that did not comply with the control system. I was dealt with because the system does not permit individuality or true independence.

Now I ask you how can you separate energy from politics?

off the normal TOD subject matter...but in the larger scheme of things ..maybe not. it seems that when we talk about peak oil , peak a lot of things keeps creeping into the conversation. that's what it feels like to me ..the last gasps of an insatiable society...it's more than just consumerism..it's man conquering nature taken to the n th degree. in my own neck of the woods, one manifestation is a recent bill by our estemeed senator, conrad burns:
..it seems that conrad isn't satisfied helping the downtrodden, like mr. abramoff, so now he wants to road our local jewel, the selway-bitterroot wilderness:


...S2633 would allow the buiding of roads up 17 canyons in the wilderness to lakes like this one( in fact , this lake is one of the included ones) . this ,in effect guts the wilderness area. it would be a wilderness in name only. so, the almighty internal combustion engine claims another victim. if any of you out there care about wilderness , and backcountry, please contact one of the senators on the senate energy and natural resources committee by e-mail and stop this pernicious bill. </rant>

CNN is promoting the energy theme that will ground their morning show this week. From the promos it looks like it involves how gas prices are squeezing middle/lower class people 'in the heartland'.

O.K. i'm itching and its my first day (speaker here). I've have some points/half questions i've wanted to say so here goes.

1)Will demand destruction not hide peak oil production?
  For example SA held their o/p this month (Held or had no choice!!?)so Has $70 barrel caused the lull?

2)Would SA not go to great lenghts to hide their peak, even staging their own 'terrorist attack' that would take' down production'?

3)Lets say gas costs hit users and traffic was less, people driving smaller lightr cars circa 3years down the line; opposing the prophets of doom, can we not transition easily to 500mpg+ machines? How I hear. Simple, strap a 20cc 4 stroke engine to a faired recumbent bicycle. Blown plasic fairing Alu. bike frame etc, not rocket science. Presto. We could have made a machine like this 40 years ago!

Shoot me down in Biodeisel flames!

Marco.

Oil prices & Interest rates slowing US economy
=======
Economy May Be Heading for Less Sunny Days After Growing at Strong Pace at Beginning of Year

WASHINGTON (AP) -- After years of talking about the Goldilocks economy -- not too hot and not too cold -- all of a sudden it appears the little rascal just got mugged by the three bears. While the economy began the year growing at a strong pace, activity seems to have hit the skids in the spring.

Factory orders fell in April. The five-year housing boom is cooling, with home sales falling and price gains slowing. In the biggest shocker of all, the government reported Friday that businesses created just 75,000 new jobs in May -- 100,000 fewer than expected.

If the onslaught of weaker economic data was not bad enough, there also are signs that long-dormant inflation may be starting to be a problem, and not just in the pain from $3 per gallon gasoline.

The relentless rise in crude oil to above $70 per barrel seems to be starting to trigger price problems outside of energy. The core rate of inflation, excluding food and energy, is now above the 2 percent upper limit favored by Federal Reserve Chairman Ben Bernanke and his colleagues.

Slowing economic growth and rising inflation raise the specter of stagflation. This dreaded combination of economic stagnation and inflation had the country in its grips for more than a decade through the 1970s and early 1980s, bringing grief to the presidencies of Richard Nixon, Gerald Ford and Jimmy Carter.

In perhaps the most ominous worry of all, some economists see parallels between May 2006 and May 2000.

Six years ago, an unexpectedly weak payroll number was dismissed as a fluke. Yet in hindsight, it was the start of a slide that culminated in a recession the next year that ended the longest economic expansion in U.S. history.

While economists hope this year's slowdown will have a more benign ending, they are busily marking down their economic forecasts based on the recent weaker-than-expected numbers.

The overall economy grew at an annual rate of 5.3 percent in the January-March quarter. Economists foresee a rate of about 2.5 percent in the current April-June quarter, down a full percentage point from estimates for these three months.

"We are starting to see evidence that the economy is slowing pretty abruptly," said David Wyss, chief economist at Standard & Poor's in New York. "The question is will there be enough strength in other areas to offset the slowdown in consumer spending and housing."

All of this comes at an inopportune time for President Bush, who last week nominated Goldman Sachs chief executive Henry Paulson Jr. to replace John Snow as treasury secretary.

The White House hopes the selection of a Wall Street superstar can help lift Republicans' sagging poll numbers before the November elections, a goal that a weakening economy could thwart.

Higher gasoline prices and weaker job growth already have affected consumer confidence, which fell in May by the steepest amount since last fall's hurricanes.

The worry is that overall consumer spending, which accounts for two-thirds of total economic activity, will slow. U.S. automakers already are feeling the pinch, reporting big declines in May auto sales.

Many retail chains did post good sales in May. But the largest retailer, Wal-Mart, had results that failed to meet expectations, reflecting the squeeze its lower-income customers are feeling from gas prices.

Still, analysts say they do not see the situation in such dire terms that it means the country is headed for a recession.

In some ways, the slower growth is just what the Fed has sought with its string of 16 interest rate increases over the past two years. The higher borrowing costs were designed to slow economic activity enough to keep inflation under control.

With signs of the slowdown increasing, the Fed is likely to call a halt to further rate increases, especially if the recent jump in inflation proves temporary.

Many economists also dismiss worries the current slowdown could signal that Fed has overdone the credit tightening, raising prospects of a rougher outcome rather than the soft-landing aimed for.

"When the economy slows, it is not surprising that at points we feel like we are slowing too much," said Mark Zandi, chief economist at Moody's Economy.com. "It is very tricky to get the economy to throttle back in a smooth, clock-like way. The current situation is not unusual."

For those who haven't seen it, here is a link to the video of Rob Neuman's HISTORY OF OIL.  It's pretty funny!  

http://www.informationclearinghouse.info/article13416.htm

How will Americans respond to Peak Oil ? Or more correctly at what point can they no longer ignore it.

Right now like global warming it is still easy to ignore Peak Oil but certainly within the next 5-10 years this will not be possible. The means the end of the American dream ( wasteful expansion ) probably the heartland will be the hardest hit since this is where wages are low commutes fairly long and basically no public transportation.  One interesting problem is exactly how say 10 gal gasoline effects the typical middle American with a income of say 60k a year and a dual commute of 60 miles a day.  
Some quick math at 20mpg your talking about 3 gallons of gas or 30 dollars a day at 10 dollars 15 at 5 that's fast approaching. giving 600 dollars a month at 10 and  300 dollars a month at 5.

Assuming a tax rate or overall non spendable income of 20%
give a monthly income of  4000.
Assuming a mortgage of 1500 care payments of 200 plus and additional 1000 a month of misc expense gives expenses of
1500+400+1000= 2900 leaving 1100 for saving etc.
Adding the gas expense of 300 leaves 800 bucks this assumes no inflation because of increased fuel prices.

Thus you can see that a typical lower middle class family would be right at the edge with 5 gallon gas and well over at 10.

Some numbers supporting 60k a year are here
http://www.econlib.org/library/ENC/DistributionofIncome.html

The median income is  48,000
http://www.census.gov/Press-Release/www/releases/archives/income_wealth/002484.html

Thus its clear that a large percentage of Americans or in the 60k or less bracket probably 60% or more. Generally the income or average wages drop dramatically over say 90k a year.

For the 48000k scenario your basically at zero with gas prices at 5 dollars a gallon.

Maybe someone would be interested in getting more information and develop some graphs showing the impact of higher gasoline prices and disposable income.

5 dollars a gallon and higher seems to be the breaking point
in simple analysis.

Note that the overall effect of rising prices falling home values for home far from the city center etc are not included.  But certainly the scenario is prime for self forcing where as people have to drop out of the American dream and adjust there life styles probably via bankruptcy it spreads causing more problems. Considering the housing shortage inside major cities and the pressure on rent for prime spots near the limited public transport I expect to see severe disruptions  in middle America and strained conditions on the coasts. I don't think people have really considered the disruptive effect even a modest rise in gas prices would have on the US. You don't just suddenly convert
to a European style community overnight the impact on a large number of americans will be large and devastating.

Maybe some of the spreadsheet gurus would want to delve into this. My anyalsis points to the US being in some deep sh@%$
quickly as gas prices rise over 5 dollars a gallon.

http://news.ft.com/cms/s/a73094d4-f3f8-11da-9dab-0000779e2340.html
More evidence that the US is experiencing a real counterrevolution since 1981, which I have trouble finding a point of comparison for.
Huge gains for corporate America, nothing for anyone else.

Saudis Cite Market Forces For Lower Crude Output - Wall Street Journal

Kingdom Denies Any Effort
To Curb Global Oil Supply;
Stores Are Near Capacity
By BHUSHAN BAHREE
June 5, 2006; Page A3

CARACAS, Venezuela -- Saudi Arabia's oil minister confirmed that his country's massive crude-oil output has declined in recent months, but he attributed the trend to a drop in demand and denied the kingdom is aiming to limit supply.

In an interview after a meeting here of the Organization of Petroleum Exporting Countries, Ali Naimi said other cartel members are having trouble finding buyers for all the crude they are producing, at a time when global stores are near full and many refiners have closed facilities for routine maintenance. One Saudi official said an estimated three million barrels a day of refining capacity is out of action and unable to process crude, at a time when the world is using some 84 million barrels a day of oil products like gasoline and jet fuel.
[Ali Al-Naimi]

"It's not just heavy oil. Even light oil is having problems" finding buyers, Mr. Naimi said, referring to premium grades of crude known as light crude that are highly prized by refiners because they have high gasoline yields.

Asked if the kingdom was easing up on supply because of concern about the buildup of inventories in the U.S. and other importing countries, Mr. Naimi rejected such a motive, replying: "At $70 a barrel?" Mr. Naimi suggested that producers will sell all the oil they can at such high prices.

The implication of Mr. Naimi's remarks is that Saudi Arabia would again open its oil spigots when buyers ask for more oil. For the past two years, the Saudis say, their policy has been to sell as much oil as buyers want, to the limit of the kingdom's production capacity.

U.S. benchmark crude for July delivery settled at $72.33 a barrel, up $1.99, on the New York Mercantile Exchange Friday. So far in 2006, crude oil is up $11.29 a barrel, or 18%, and the price has more than doubled since the end of 2003 due to rising global demand and supply constraints.

The Saudi minister said the kingdom's oil output fell to 9.1 million barrels a day in April, the most recent figures available. Saudi output averaged nearly 9.5 million barrels a day in the first quarter, according to data compiled by the International Energy Agency.

The Saudi oil czar shrugged off concerns about large inventories, a trend that some in OPEC have cited as warranting a cutback in production. Mr. Naimi said producers must focus not only on stockpiles but also on spare oil-pumping capacity world-wide. Because there is little extra oil that exporters can produce, oil held in inventories can act as a cushion against supply disruptions.

But he ruled out the idea of Saudi Arabia discounting its oil to sell more barrels. "We will not leave money on the table" for others, Mr. Naimi said.

Saudi Arabia prices its oil according to a formula that takes into account prevailing prices on futures markets and on refinery margins -- or the difference between the price of crude and the price of crude-based fuels -- in different regions. It adjusts prices monthly for America, Europe and Asia. Many other exporting countries follow the kingdom's lead. OPEC's members assert that by basing prices on futures markets and on refining margins, they in effect let markets set the price of their oil.

With prices near a nominal high -- though still shy of highs reached in the early 1980s when adjusted for inflation -- OPEC's ministers on Thursday brushed aside a proposal by Venezuela to trim output and decided to maintain current output quotas totaling 28 million barrels a day, excluding Iraq.

OPEC and industry officials say the cartel's output is currently below that. In part that is because of supply shortfalls in Nigeria, whose production has been hobbled by political violence. But cartel officials say the production shortfall is also because Saudi Arabia and others in the cartel are encountering problems selling oil. Buyers have cut back purchases from other exporters, including Iran and the United Arab Emirates.

Iran's response has been to keep pumping oil and storing it, some of it in tankers, while it looks for buyers on the spot market. Some industry estimates put the oil Iran has stored in the past six weeks or so at more than 20 million barrels.

A senior Iranian oil official attending the OPEC meeting confirmed that his country, OPEC's second-largest oil producer after Saudi Arabia, was having trouble selling heavy oil and was storing it. But he didn't specify the volumes involved.

In contrast, Saudi Arabia has reduced output to match demand for its crude. Saudi Arabia sells oil exclusively under long-term contracts with buyers that have some latitude in deciding how much crude to take every month at the prices specified by the kingdom. "We don't sell on the spot market," Mr. Naimi said.

Write to Bhushan Bahree at bhushan.bahree@wsj.com

So what gives???

-Mainer