New Reasons for Weariness

Inflation has become such a fact of life in the U.S. that many Americans have simply become resigned to it. The weary mood intensified last week with two bits of news: wholesale prices rose at a clip that threatened soaring prices for manufactured goods in months to come, and Ford Motor Co. raised prices on its 1974-model cars and trucks--even though it had signed an agreement not to do so. The Government's soon-to-be-defunct Cost of Living Council seemed powerless to stop the rise. Only the Federal Energy Administration appeared capable of vigorous anti-inflationary action. It accused Gulf Oil Corp. of inflating the price of imported crude oil and passing part of the overcharge along to U.S. consumer--a complaint that if sustained, could lead to an order rolling back gasoline prices at the pump. Details of the three developments:

> The Labor Department announced that the Wholesale Price Index jumped .7% in April. Although that was the smallest monthly leap since last October, and little more than half the March rise of 1.3%, there was no cause for celebration. The good news was confined to a 3% drop in wholesale farm-product prices, which should lead to a welcome decline in some retail prices within the next few weeks--but many economists believe that the downward pressure on food is about spent. Industrial products ranging from iron and steel scrap to lumber, cotton, man-made fibers and animal hides rose an average of 2.3% in April, a figure that almost equals the torrid pace set earlier this year. Overall, the wholesale index in the past three months has risen at a compound annual rate of 13.5%, a sure sign that scorching inflation will last at least several more months as wholesale costs push up retail prices.

> Ford announced price boosts averaging $163 (including $50 for optional equipment that is now standard) on its 1974 models, only five months after agreeing, as did General Motors and American Motors, to hold prices steady for the rest of the model year in exchange for early exemption from formal wage-price controls. Chairman Henry Ford II contended that the company's costs have risen so sharply as to release it from the agreement under some language granting exemptions in the case of unforeseen economic developments. Indeed, he said, prices on 1975 models would have to go "hundreds of dollars" higher, in part to recover the costs of new antipollution equipment.

John Dunlop, head of the COLC, objected--but rather mildly. Two weeks ago, he called a 2.9% price increase by Chrysler, which had not signed the price-restraint agreement, "a display of consummate gall." He confined himself to calling the Ford increase "unwarranted" and conceded that Ford's data "indicate that costs per unit have risen above those projected." Since general wage-price controls have expired, Dunlop cannot order a rollback; to get the Ford increase canceled or reduced he would have to go to court, and it is doubtful that the White House would permit the Justice Department to take the case. Since he has no other option, Dunlop's only hope of containing the auto-price rise appears to lie in bargaining with GM, the price leader. GM Chairman Richard Gerstenberg stated at week's end that his company's production costs have risen $200 per car and that GM has asked the COLC to approve a price increase. He did not say what he will do if Dunlop turns him down.

Whatever happens, the auto case points up the toothlessness of the price-restraint agreements that Dunlop negotiated with 16 other industries while the Administration was dismantling controls bit by bit over the past nine months. The industries include some of the most vital in the economy: retail trade, fertilizer, coal, aluminum and petrochemicals. Under present law, the COLC, second party in all the agreements, will die on June 30, and the Senate last week voted down a proposal to continue it as a watchdog agency. Result: there will be no unit left even to monitor the agreements.

> The Federal Energy Administration, which still has price-control authority over oil under a special law, is sued a "notice of probable violation" against Gulf. It accused Gulf of over charging by $46.5 million on crude oil sold by two of its African affiliates to its own domestic units and then passing on some of the alleged overcharge to American motorists and buyers of other petroleum products. Gulf protested that the transactions between its subsidiaries were entirely proper. It will have ten days to persuade the FEA of that; if it can not, the agency can order gasoline and other product prices cut deeply enough to in effect refund the overcharge. The case is the first of several that FEA expects to bring against major oil companies. Charles Owens, FEA price-control chief, suspects that the oil giants as a group have made overcharges totaling as much as $150 million.

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