RIYADH, Saudi Arabia - President Bush urged OPEC nations on Tuesday to put more oil on the world market, warning that soaring prices could cause an economic slowdown in the United States.
"Paying more for gasoline hurts some of the American families," Bush told a small group of reporters before heading into more talks with Saudi King Abdullah. "And I'll make that clear to him."
Shortly after Bush spoke, the Saudi oil minister said the kingdom, responsible for almost one-third of the cartel's total output, would raise oil production when the market justified it.
In a stern warning to Iran days after a Jan. 6 confrontation with U.S. warships in the Persian Gulf, Bush said his decision to impose "serious consequences" will be the same whether an attack against an American vessel resulted from an order by the government in Tehran or a rash decision by an Iranian boat captain.
"It's not going to matter who made the decision," Bush said. "If they hit our ships, we will hold Iran responsible."
U.S. officials claim Iranian speedboats swarmed three Navy warships in the Strait of Hormuz, the narrow waterway that is the only entry and exit to the Persian Gulf. They said U.S. Navy commanders were considering firing warning shots, before the retreat of the five Iranian speedboats, which the Pentagon said were operated by the elite Revolutionary Guards.
Iran has denied that its boats threatened the U.S. vessels, saying the incident was a normal occurrence, and accused Washington of fabricating video and audio it released. Iran's government has released its own video, which appeared to be shot from a small boat bobbing at least 100 yards from the American warships.
Bush said it would be up to the captains of the American ships to determine if their vessels are in jeopardy from Iranian boats and "there's no time to be spending a lot time on the phone trying to figure out what to do."
"Whoever ... is in control of these boats, best be careful," he said of the Iranians.
The president spoke to reporters in an ornate room of the guest palace in this kingdom which holds the world's largest supply of oil. Oil prices topped $100 a barrel this month.
"When consumers have less purchasing power because of high prices of gasoline -- in other words, when it affects their families -- it could cause this economy to slow down," Bush said. "I hope that OPEC, if possible, understands that if they could put more supply on the market it would be helpful."
The Organization of Petroleum Exporting Countries, which accounts for about 40 per cent of the world's needs, next meets Feb. 1 in Vienna, Austria, to consider increasing output. At the same time, Bush acknowledged that there is little excess capacity in the marketplace, with many oil-producing countries already operating "full-out."
And he said a growing demand for oil, especially from fast-growing India and China, is helping to strain supply and lift prices. Many economists agree, saying that oil prices may not fall much even if Saudi Arabia and other OPEC countries raise production.
Asked whether he thought the U.S. economy was sliding toward recession, as some economists predict, Bush said, "These are times of economic uncertainty, but I have confidence in the future."
In Washington, two government reports released Tuesday added to recession fears: Wholesale inflation shot up in 2007 by the largest amount in 26 years and retail sales fell in December. Bush's administration and Congress are looking at ways, such as tax cuts, tax rebates or other incentives, to give the economy a boost but he declined to discuss it. "I'm going to watch very carefully," he said.
The Saudi oil minister, Ali Naimi, said the U.S. economy is significant to the oil market and demand. "All our effort is to maintain prosperity and growth in all countries, particularly the number one consuming nation in the world," he said.
But, the minister said, "What affects the U.S. economy is more than the supply of oil."
Secretary of State Condoleezza Rice, traveling with Bush in the Mideast, slipped away from the Saudi capital at 6:40 a.m. Tuesday for a quick trip to Iraq. Bush said he had been encouraged by signs of legislative progress in Baghdad and decided that she could "help push the momentum by her very presence."
She congratulated the prime minister, Nouri al-Maliki, on the passage of U.S.-sought legislation that reinstates former Saddam Hussein loyalists to government jobs and pushed for progress on other benchmark laws. At a Baghdad news conference, she said political progress has moved along "quite remarkably" and shows that last year's increase of U.S. troops in the country was paying dividends.
Bush dismissed widespread speculation that he would go to Iraq while traveling in the region, saying he decided to send Rice instead.
One of the primary objectives of his eight-day Mideast trip is to build support for the Israeli-Palestinian peace process. He said that Abdullah asked him why he was optimistic about securing an agreement before his White House term ends in January 2009.
"Part of my mission was to make clear that one reason why the talks failed in the past is that there wasn't participation by the neighbors," Bush said, referring to Arab countries that have kept an arm's length from the negotiations.
Bush said he was convinced that the Arab leaders want to see the creation of a Palestinian state in a peace agreement with Israel. "They want progress because the issue frustrates them," he said.
But, he added: "They wanted to make sure that the efforts by the United States were real."
Bush said he has faced persistent questions during his trip about a new U.S. intelligence estimate that Iran had abandoned a secret nuclear weapons program in 2003. That conclusion contradicted Bush's claim that Iran is actively pursuing nuclear weapons now and raised questions in the Mideast about U.S. intentions toward Iran.
The president said he made clear that the new finding was a judgment by independent intelligence agencies and that "all options are on the table for dealing with Iran." At the same time, he said he has told leaders -- who want the U.S. to keep Tehran in check but are nervous about the impact of any military confrontation -- that he wants a diplomatic solution.
Earlier, Bush spoke before meeting with Saudi business owners, many of them young and educated in the United States. He then visited al-Murabba Palace and The National Museum, stopping in a gallery describing the Prophet Muhammad's life.
He ended the day by riding out into the desert to the king's weekend retreat and farm where 260 Arabian horses are kept in air-conditioned stables. On a chilly afternoon, the two men watched from a glass-enclosed viewing room as a trainer paraded sleek horses around a showing ring outside. The excursion repays the two visits that the king, while crown prince, made to Bush's ranch in Crawford, Texas, in 2002 and 2005.
Bush wore a full-length fur-lined robe to dinner, and a sweater underneath against the cold temperatures. The president was preceded by an incense-bearer who left a trail of pungent smoke. Bush was spending the night at the ranch and having breakfast with the king before leaving for Egypt.
