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US concerned over oil prices

Reporter: Norman Hermant

TONY JONES: The eyes of markets around the world were on Texas today, as the US President met the
Saudi Crown Prince to talk about relieving the pressure on crude oil prices. George W Bush's
approval ratings sag every time petrol costs jump, but the Saudis say instead of a quick fix their
priority is a long-term boost in production and an increase in the number of refineries. Along with
oil prices, the White House is also keeping a close eye on the political deadlock in Iraq. Three
months after elections, there's still no government. And there are new reports that two months ago
a US operation just missed netting Iraq's most wanted insurgent, Abu Mussab al-Zarqawi. Norman
Hermant reports.

NORMAN HERMANT: It's not every day the Crown Prince of Saudi Arabia drops into a Texas diner, but
this somewhat stilted PR exercise shows just how sensitive the Saudis are about their image, with
petrol prices in America soaring and the US President eager to talk about ways to boost oil
production.

GEORGE W BUSH, US PRESIDENT: One thing is for certain - the price of crude is driving the price of
gasoline. The price of crude is up because not only is our economy growing, but economies such as
India and China's economies are growing. And, ah...here comes my guest.

NORMAN HERMANT: Both the US and Saudi Arabia want to show their relationship is on the mend. And
the Saudis used this opportunity to discuss their $65 billion plan to increase production from a
maximum output of about 11 million barrels a day now to 12.5 million barrels a day by 2009 and to
15 million barrels a day by 2015. None of this will happen overnight, but the Saudis say the real
short-term problem in the US isn't a shortage of crude oil - it's a shortage of refining capacity.

ADEL AL-JUBEIR, SAUDI FOREIGN AFFAIRS ADVISOR: It will not make a difference if Saudi Arabia ships
an extra million or two million barrels of crude oil to the United States. If you cannot refine it,
it will not turn into gasoline and that will not turn into lower prices.

NORMAN HERMANT: Oil isn't the only thing keeping the White House busy. Secretary of State
Condoleezza Rice has reportedly stepped up efforts to break the political deadlock in Iraq. The
country's National Assembly has met again, but there's still no deal on forming a government, three
months after elections.

CONDOLEEZZA RICE, US SECRETARY OF STATE: We're going to continue to say that it is important to
keep momentum in the political process and that's what this is really about - it's keeping momentum
in the political process.

NORMAN HERMANT: As violence increases, there are reports that American forces just missed capturing
Iraq's most wanted fugitive, Abu Musab al-Zarqawi, two months ago. US forces received a tip Zarqawi
was headed to a secret meeting in Ramadi. The city was surrounded with mobile checkpoints and
surveillance drones flew overhead. At one checkpoint, as soldiers stopped a car, a pickup truck
following behind quickly turned around. Officials say they believe Zarqawi was inside. The
Americans followed, but Zarqawi was gone by the time the truck was pulled over. It's believed he
may have jumped out under a bridge to avoid detection from above. Zarqawi slipped the net, but US
forces did reportedly recover large amounts of cash and, crucially, a laptop computer with a very
big hard drive. and, crucially, a laptop computer with a very big hard drive.

THOMAS SANDERSON, CENTRE FOR STRATEGIC AND INTERNATIONAL STUDIES: It can yield a tremendous amount
of clues as to the nature of his organisation, the insurgency, where they get their money, where
their operations are planned and carried out.

NORMAN HERMANT: Officials say the laptop has already provided these recent pictures of Iraq's most
feared insurgent leader. Norman Hermant, Lateline.