Saudi Arabia provided hope for a break in high worldwide oil prices Monday by pledging to step up production by 500,000 barrels a day if the current price of crude doesn't fall swiftly and sharply.
Although the extra Saudi production probably wouldn't be available in this country for 45 days or more, the announcement could quickly change the psychology of the energy markets. That, in turn, might bring a measure of price relief this month to motorists, factory owners and other big users of petroleum products.
The effect on California gasoline prices is likely to be small because supplies here generally come from in-state, Alaskan or Indonesian sources, said Arthur O'Donnell, editor of California Energy Markets, an independent weekly newsletter for the energy industry.
The announcement by Saudi Arabia, the world's No. 1 oil exporter, follows a stunning run-up in prices from late last year--when analysts still were talking about a supposed surplus--to current levels approaching a nine-year high.
That rise has translated into steep increases in U.S. gasoline prices, yielding pump prices that surpassed $2 a gallon in the Midwest. It also has triggered calls for government investigations of the energy industry.
While declining to predict the effect on U.S. gasoline prices, the Clinton administration welcomed the Saudi announcement.
P.J. Crowley, the spokesman for the White House National Security Council, said that "from our standpoint, increased supplies at reasonable prices are what is right for the global marketplace."
Asked what role the United States had played in the decision, Crowley said only that "we've made our position clear on the need to meet global demand for oil."
It was feared prices in California were heading to the $2-a-gallon range back in March, but they generally eased in recent weeks. As of Monday, the statewide average price of self-serve regular was $1.71 a gallon.
O'Donnell said the promised Saudi production increase was "a symbolic gesture. It will help people's perceptions about the oil supply."
More upbeat was John Kilduff, senior vice president of energy risk management at Fimat USA Inc. in New York. "This is a solid commitment by the Saudis to stem prices. It should be good for an immediate 50-cent to $1-a-barrel drop."
"If others go along," Kilduff added, citing OPEC members Kuwait and the United Arab Emirates and nonmember Mexico, "this would signal an end to the rally, and prices could be headed below $30 a barrel."
