Word: cartels
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Dates: during 1970-1979
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...subsidy plays directly into the hands of the OPEC cartel. By risking a wild scramble for imported heating oil, the Administration is, in effect, encouraging oil producers to raise their already extortionate crude prices all over again. After all, why not do so if the U.S. keeps coming up with fresh schemes for paying the money? That seemed OPEC's view, as its secretary general, Rene Ortiz of Ecuador, declared last week that he would like an increase of at least 25%, to a new base of $20 per bbl., when the cartel meets in Geneva on June...
...Administration last week also started phasing out oil price controls in an effort to stimulate both increased domestic production and decreased consumption. With controls loosening, U.S. prices will rise whenever cartel members post increases. Economist Okun figures that a $1 raise by OPEC adds $4 billion to U.S. prices and drains $4 billion from U.S. consumer purchasing power. Admits Inflation Adviser Kahn: "The standard of living is going down, and there is nothing that I can do about it. The question is how to divide the burden without tearing ourselves apart...
Since April, when OPEC boosted prices 9% to an average of $14.55 per bbl., price gouging by individual members has pushed up charges for some grades of crude to $20 or more per bbl. Lately cartel members have been leapfrogging each other to grab ever higher prices. No sooner did Algeria and Nigeria post unilateral increases of up to $2.45 per bbl. on their low-sulfur crude than Libya raised the price of its own competing grade by a comparable amount. The increase, Libya's second in a month, was promptly followed by a rise by Iraq as well...
Prices will probably rise at least somewhat in any case when the cartel meets in Geneva on June 26. One possibility being urged by both Saudi Arabia and the United Arab Emirates: dumping the bewildering hodgepodge of existing prices and settling on a single figure for all members, perhaps at a new level of $17 to $18 per bbl. Doing so would be coupled with a pledge by members not to add on additional premiums and surcharges. That would seem merely to ratify the cartel's unilateral increases since April, with no assurance to importing nations that...
Another threat is OPEC. Some of the economists expect the oil cartel to go on raising prices from the present average $16.40 per bbl. to about $18 by year's end. Higher fuel costs would both fan inflation and be an added tax on Americans' disposable income, thus prolonging the recession. Otto Eckstein, chief of Data Resources Inc., the economic analysis firm, favors putting a strict limit of 7 million bbl. per day on petroleum imports, which now average about 8 million bbl. daily; mandatory limits would probably result in gasoline rationing. Okun and other board members would...