A Global Deal on Prices?

The runaway spiral of oil prices has gone beyond economics to become a matter of diplomatic concern. Secretary of State Henry Kissinger implied at a press conference last week that it could bring on a "worldwide depression" by making industrial nations unable to pay for the oil they need. He went on to promise mysterious "personal initiatives" by President Nixon, starting this week, to get about 20 oil-consuming and -producing countries together to do something to prevent prices from exploding through the stratosphere.

What Kissinger seems to be aiming at is a global deal under which oil-burning countries would guarantee Arab and other producers a high price for a long period in return for assurances of adequate supplies and no further price escalation. The process of trying to work out such a compact will probably begin with Nixon's inviting representatives of oil consumers to one or more conferences; later, producer officials would be asked to join. Diplomats offer only illustrative figures, but one 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 strategy are open to serious challenge. If it succeeded, it would lock the West for long years into paying for its oil high prices that might not hold up in an open market. Anyway, the oil producers for the moment show little interest in settling for any price other than the highest they can get. Shah Mohammed Reza Pahlavi of Iran has said that a fixed price for oil would be acceptable only if the West could also guarantee fixed prices for the goods that it sells to oil producers --an obvious impossibility 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 increases started by the Persian Gulf nations. Nigeria and Venezuela, which supply 10% of U.S. oil imports, raised posted prices (a theoretical base figure for taxes that influences the actual selling price) to more than $14 per bbl., topping the Persian Gulf price of $11.65. Libya more than 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 its actual selling price from $6 per bbl. to $10.80.

Even Canada, the U.S.'s prime supplier, announced an increase in its export 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 pump round the country, and as much as 70 in some areas. And these boosts reflect only increases in the price of crude through December, not the current round of increases; consumers will start feeling January's jumps on Feb. 1, when the next batch of boosts will be permitted under price controls. Federal Energy Chief William Simon predicted that gas will go up a total of 80 to 110 per gal. in coming weeks, jacking up nationwide average pump prices to somewhere between 510 and 540 per gal. for regular. Heating oil likely will rise a dime a gallon by March 1, to an average of 390 plus tax--a third more than it cost even last month.

Those, moreover, are only the legal prices. Over the New Year weekend, motorists in a near-frenzy to find gasoline (see following story) paid as much as $2 per gal. to price gougers. Internal Revenue Service agents last week checked 2,300 gas stations and found that nearly 20% of them were overcharging. About the only consolation motorists can find is an economy forced on them by the Government: the new nationwide 55-m.p.h. speed limit approved by the President last week. Driving at that pace rather than at the old 70 m.p.h., an average car will save 18% in fuel--just about what the increase in gas prices amounts to.

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