Paying More to Pump

Middle East oil is the cheapest and most plentiful in the world, but from now on international oil companies will have to pay more for it. Last week, after two years of haggling, the Organization of Petroleum Exporting Countries (OPEC) finally reached an agreement with the eight largest companies operating in the Middle East to increase royalties to host governments--4-c- a bbl. more on 1964 production, rising to 6-c- by 1966. All the area's major oil countries except Iraq have ratified the agreement, from which they stand to gain more than $100 million in added revenues for 1964.

While that was only a drop in the barrel--Middle East governments collected $1.75 billion from oil last year--the agreement marked the first time since OPEC was founded in 1960 that the organization has succeeded in getting more money out of the companies. The oil firms already pay an average of 75-c- a bbl. in royalties, plus a 50% tax on profits. In addition to an oversupply of oil and slumping world prices, the producers are now saddled with an added cost of doing business. They have no choice but to absorb it.

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