Oil Industry

Saudi Arabia plans to increase its oil production by 200,000 barrels a day next month to help tame high fuel prices, U.N. Secretary-General Ban Ki-moon said Sunday. The planned output of 9.7 million barrels per day would be an increase of more than 6% since May and would take Saudi crude output to its highest monthly rate since August 1981, according to U.S. Energy Information Administration data.

Facing strong U.S. pressure and global dismay over oil prices, Saudi Arabia said Sunday that it would produce more crude this year if the market needed it. The vague pledge fell far short of U.S. hopes for a specific increase and may do little to lower prices immediately.

For decades it has been a bipartisan political staple -- the jaunt to the beaches of Santa Barbara to profess opposition to oil drilling at the spot where a massive 1969 spill despoiled sea life and ocean waters, launching the modern environmental movement. With visits here and elsewhere, Republicans Pete Wilson and Arnold Schwarzenegger used their environmental credentials to win the governor's office.

The commander of Iran's elite Revolutionary Guard said the government might shut down vital oil lanes through the Persian Gulf if the country were attacked by the United States or Israel, according to a newspaper report Saturday. Maj. Gen. Mohammad Ali Jafari warned that if there were any confrontation over Iran's nuclear program, Tehran would try to damage Western economies by targeting oil.

Amid surging demand for oil, a severe bottleneck has developed in production of high-quality West African crude, alarming world leaders and demonstrating a new vulnerability in fragile oil markets. With production declining elsewhere, consumer nations had been looking hopefully toward Nigeria. But rebels who have waged an increasingly bold campaign in the oil-rich Niger Delta have slashed the country's output in their most recent attacks.

Investors in Exxon Mobil Corp., Royal Dutch Shell and BP are losing money, even though oil prices are hitting records, as they cede control of production to state-owned energy companies. Exxon, the world's biggest company by market value, saw its stock fall 7.6% this year after Venezuela forced the Irving, Texas-based producer out of the Orinoco Belt, South America's largest oil territory. Shell lost 4.6% in London trading as Russia seized control of the $22-billion Sakhalin-2 venture.

Re "Justices slash Exxon Valdez verdict," June 26 Although the pathetic decision by the U.S. Supreme Court in the Exxon Valdez case will confirm for many that the system works for the establishment and punishes the innocent, perhaps there is a potentially good outcome. That is the point it makes for not adding one square foot of the Alaska National Wildlife Refuge or any other potential "baronetcy" for oil exploration. Like all good con artists, the oil companies promise anything to get the rights to drill at the beginning, but once the exploration area is exhausted, the residents of the areas are left to clean up the mess.

This town of 6,700 sits amid the richest oil fields in California, but nobody would mistake it for Dubai. There are no gleaming towers. Empty storefronts line its downtown streets. One of its two car dealerships recently folded, and a church recently went into foreclosure. To make more money, the city wants to move its eastern border 17 miles and annex an auto raceway under construction beside Interstate 5.

Three decades after pumping its last drop, the first oil well in Nigeria is marked by a decrepit signboard bearing what would seem an uncontroversial statement: Oloibiri Well No. 1, drilled June 1956, 12,008 feet. But this well, its wellhead furred with rust, is at the center of an increasingly vitriolic feud between two villages over who owns the land it's on. The conflict is fed by hope that soaring prices will tempt big business to squeeze more oil from the well and give a pittance to the village that owns the land.

The same historically high oil prices that are expected to contribute to massive profits for the major oil companies in the second quarter are again dragging down financial results in their refining operations. And for companies whose primary business is refining oil and selling gasoline, quarterly earnings versus a year earlier could be ugly. Plummeting stock prices for many refiners reflect the difficult operating environment.