NEXT YEAR shapes up as a year for oil price increases after what economist Lawrence Klein labels "an enormous OPEC reprieve" in 1978.
The fact is that the managers of the cartel had little choice this year except to hold the line on oil prices. By doing so, they made a major contribution to a modest improvement in the world economy.
The sharp drop in the value of the dollar provided a great benefit for Japan and Europe - one they usually fail to acknowledge - by lowering their cost for oil imports, priced in dollars.
For the members of the Organization of Petroleum Exporting Countries, however, the dollar decline, combined with a general price inflation, has dug into the real value of receipts from sale of their oil treasures.
A revealing tally in the annual report of the International Monetary Fund showed that the combined OPEC current account balance (receipts minus the cost of imported goods and services) declined from a peak of $68 billion in 1974 to an average of $37 billion 1975 throught 1977. This year, the current account balance is estimated to be no more than $20 billion.
FROM THE TIME of the Arab oil embargo in 1973 to the end of 1974, petroleum prices were increased from $3.29 a barrel to $11.50. That sharp jump over such a short time had a devastating impact on growth and trade everywhere.
Since then, although petroleum prices have been increased by about an additional 10 percent, by the U.S. wholesale price index has risen about 30 percent.
But the 1974-1975 recession, and a sluggish economic recovery, inhibited OPEC's ability to keep up the real price. Moreover, the substantial flow from the North Sea and Alaska, vast new discoveries in Mexico, the promise of substantial oil off the China coast and the Baltimore Canyon have all helped to keep OPEC prices in check.
In addition, the strong political ties between the United States and Saudi Arabia - still the dominant oil power - have induced the Saudis to restrain others in the cartel.
But as Klein observes, a modest improvement in world economic growth is projected for 1979-1980, nothing to rave about, but enough to justify another 10 percent increase in oil prices. This will probably be announced in mid-December, when OPEC meets in Abu Dhabi.
To be sure, that will add to the already serious inflationary pressures in the United States. But it is much more acceptable than would have been a decision by the cartel to price oil in some currency other than dollars.
KING KHALID and his cabinet have made the basic decision that to price oil in something other than dollars would be devastating to the dollar - hardly in the self-interest of the Arab nations.
Saudi Finance Minister Mohammad Aba Al-Khali conveyed that promise to Treasure Secretary W. Michael Blumenthal some weeks back at a private session in Disney World. Recently, Al-khail told Rich Thomas of Newsweek magazine that to change the method of pricing oil "is out of the queation."
A little arithmetic shows why. The IMF annual report estimates the four-year cumulative OPEC current account balance, 1974 through 1977, at $178 billion. A Commerce Department tally for the same period shows that OPEC added $385.5 billion to short-term investments here (Treasury bills, etc.), including what was paid for the Arab interest in Aramco, making a total through the end of 1977 of about $45 billion.
After making allowance for gifts, aid to developing countries and loans to international agencies, OPEC probably had at least $100 billion left for financial investments in other countries in addition to its $45 billion here. If only 20 to 25 percent of that $100 billion is in dollar-denominated assets, then the total OPEC dollar holdings would be $65 billion to $70 billion.
So OPEC as a whole probably has close to 50 percent of its financial reserves in dollar assets. Al-Khail puts the Saudi figure at 80 percent. With that kind of a commitment, OPEC has as much interest in a strong U.S. dollar as does Jimmy Carter.