The runaway spiral of oil prices has gone beyond economics to become a matter of diplomatic concern. Secretary ofState Henry Kissinger implied at a press conference last week that itcould bring on a “worldwide depression” by making industrial nationsunable to pay for the oil they need. He went on to promise mysterious”personal initiatives” by President Nixon, starting this week, to getabout 20 oil-consuming and -producing countries together to dosomething to prevent prices from exploding through the stratosphere.
What Kissinger seems to be aiming at is a global deal under whichoil-burning countries would guarantee Arab and other producers a highprice for a long period in return for assurances of adequate suppliesand no further price escalation. The process of trying to work out sucha compact will probably begin with Nixon’s inviting representatives ofoil consumers to one or more conferences; later, producer officialswould be asked to join. Diplomats offer only illustrative figures, butone indicates that the consumers might offer to pay $10, $12 or even$14 per bbl. for perhaps 15 or 20 years.
Manic Escalation. Both the wisdom and the effectiveness of this strategyare open to serious challenge. If it succeeded, it would lock the Westfor long years into paying for its oil high prices that might not holdup in an open market. Anyway, the oil producers for the moment showlittle interest in settling for any price other than the highest theycan get. Shah Mohammed Reza Pahlavi of Iran has said that a fixed pricefor oil would be acceptable only if the West could also guarantee fixedprices for the goods that it sells to oil producers —an obviousimpossibility in view of global inflationary trends.
Right now, the spirit in oil markets is one of manic price escalation.Producers round the world last week joined in the gargantuan increasesstarted by the Persian Gulf nations. Nigeria and Venezuela, whichsupply 10% of U.S. oil imports, raised posted prices (a theoreticalbase figure for taxes that influences the actual selling price) to morethan $14 per bbl., topping the Persian Gulf price of $11.65. Libya morethan doubled its posted price to a hair-raising $18.76. Indonesia,supplier of 6% to 7% of the oil that the U.S. imports, lifted itsactual selling price from $6 per bbl. to $10.80.
Even Canada, the U.S.’s prime supplier, announced an increase in itsexport tax, raising the price to American buyers from $6.20 per bbl. to$10.40.
In the U.S. gasoline prices jumped at least a penny a gallon at the pumpround the country, and as much as 70 in some areas. And these boostsreflect only increases in the price of crude through December, not thecurrent round of increases; consumers will start feeling January’sjumps on Feb. 1, when the next batch of boosts will be permitted underprice controls. Federal Energy Chief William Simon predicted that gaswill go up a total of 80 to 110 per gal. in coming weeks, jacking upnationwide average pump prices to somewhere between 510 and 540 pergal. for regular. Heating oil likely will rise a dime a gallon by March1, to an average of 390 plus tax—a third more than it cost even lastmonth.
Those, moreover, are only the legal prices. Over the New Year weekend,motorists in a near-frenzy to find gasoline (see following story) paidas much as $2 per gal. to price gougers. Internal Revenue Serviceagents last week checked 2,300 gas stations and found that nearly 20%of them were overcharging. About the only consolation motorists canfind is an economy forced on them by the Government: the new nationwide55-m.p.h. speed limit approved by the President last week. Driving atthat pace rather than at the old 70 m.p.h., an average car will save18% in fuel—just about what the increase in gas prices amounts to.