It's the same story all over the oil importing world as governments try to contain the new burst of inflation caused by the OPEC action.
The economies of most other industrial nations have grown more slowly than that of the United States since the last recession, however, and they were not already slowing as was the case here. As a result, they may generally escape recession, experiencing only slow growth instead.
But in the longer term, the oil price jumps will have far-reaching effects on the economy that will be greater than a temporary recession. For one thing, the higher oil prices likely will mean that the U.S. will have to devote a significantly larger share of the nation's output to investment in alternative sources of energy and for replacement of energy-inefficient capital goods -- all at the cost of a large reduction in consumption of goods and services.
Digesting the 60-percent increase in crude oil prices that the Organization of Petroleum Exporting Countries shoved down American throats this year has produced in the United States an acute case of heartburn, otherwise known as a recession.
Ordinary consumers were caught both by gasoline shortages and huge price increases for gasoline and heating oil, and both have contributed to the growing recession.
Gasoline is much more readily available these days, with the average price now just about $1 a gallon. Heating oil, despite all the scare talk, is plentiful, but with prices getting close to 90 cents a gallon in many places.
What this has meant for consumers can be seen in the advance retail sales figures for August released last week by the Commerce Department. Retail sales rose 0.7 percent last month, largely on the strength of a sharp increase in sales at gasoline stations.
People were not necessarily buying more gasoline, but they were paying a lot more. And when they were spending more of their money on gasoline, they had that much less to spend on something else.
From April to July about 4 1/2 percentage points of the 13-percent rate of consumer price inflation was directly attributable to higher oil prices. Since consumer incomes have not been rising nearly as rapidly as prices, their real purchasing power has fallen sharply. That loss of purchasing power has hit retail sales hard, and they now stand more than 7 percent below last December's level after adjustment for inflation.
Until there is some relief from the huge rise in energy pricesthis pattern of real wage loss cannot be broken, say Carter administration economists, and the recession will continue to worsen.
Some improvement is possible this fall, when the seemingly endless string of 6 and 9 percent monthly fuel price increases caused by OPEC will taper off. The sooner that happens, the less severe the recession will be, the economists believe.
That improvement hinges, however, on a stability in world oil prices that might not occur. There were reports last week, for instance, that Nigeria crudes, which are in heavy demand, that would breach the OPEC ceiling of $23.50. With spot market prices for crude still well above the official OPEC selling prices, such a move could lead to yet another round of official increases.
Moreover, the full force of the energy price inreases has not yet hit the economy. So far the damage has been done by the temporary shortage of gasoline and the higher cost of direct oil and gas purchases. The indirect effects will be felt for months to come as business passes on the higher cost of energy used in producing everything from automobiles to paper clips.
Shortly after the latest OPEC increases were announced June 28, the Carter administration estimated that, compared to its previous economic forecasts, the hikes would add one percentage point to the inflation rate in the U.S. both this year and next, and also would reduce output by a similar one percentage point each year.
The administration's previous forecast had included the effects of decontrolling the price of crude oil produced in the United States, as President Carter plans to do between now and October 1981. That impact is now much greater, of course, with world market prices much higher.
Whether included in forecasts or not, consumers will have to shell out more hard cash for oil products as decontrol proceeds.
About 31 percent of the 8.7 million barrels of crude oil produced in the United States already is effectively free of controls and can be sold for whatever the market will allow. Some low-sulfur, light crude from Oklahoma is selling today for more than $26 a barrel.
Currently, the remainder of U.S. crude is being sold to refiners for roughly $27 billion a year less than market value. Assuming no further increases by OPEC, that would be one estimate of the cost of decontrol to American consumers. Since domestic crude oil prices were rising at least 10 percent a year, that significantly overstates the added cost to consumers as a direct result of Carter's decision to end controls.
Many oil experts, however, think there is a good possibility that decontrol will cost much less if world oil markets continue to ease over the next year or two -- which is another way of saying, if Iranian oil production is not interrupted again. Here's why.
A year ago gasoline refiners, wholesalers and retailers all were selling it for a much smaller gross margin -- the difference between what making or buying the gasoline cost and the selling price. All along the line, margins widened as markets got tight and motorists were seeking gasoline almost at any price.
As gasoline continues to get more plentiful, some sellers likely will try to pump up their sales by trimming those margins, part of which represents net profits. Retailer margins are now fixed by the Department of Energy at 15.4 cents a gallon, at least 5 cents to 6 cents more than the national average last year.
Even though it might not have seemed that way during the period of long gasoline lines, there is competition among gasoline stations. Last year they were able to stay in business with profit margins that were, on average, a nickel a gallon less than today. If they have more gasoline than they can sell this fall with their current high profit margin, you can be sure someone will soon start to shave prices. Refiners and wholesalers could feel some of the same competitive pressures.
So much gasoline is sold in the United States over the course of a year that each penny a gallon is worth more than $1 billion. If markets do continue to loosen -- and that is a big if, given the continued problems in Iran -- some of the probable shrinkage in margins should offset part of the $27 billion annual cost of decontrol.
Much the same thing could happen to margins on heating oil, which have expanded just as sharply as for gasoline. The administration's single-minded focus on building heathing oil stocks up to the 240-million barrel level by sometime in October means that there likely will be far more than enough of it around this winter even if it's far colder than normal.
Texaco announced that, barring unforeseen costs increases, it planned to freeze its heating oil price at its present level for the entire heating season. President Carter promptly asked 27 other major oil companies to do likewise.
It could happen, simply because there may be so much heating oil available that market conditions would not sustain an increase anyway. Or the market may force prices downward once customers get over their fear of a shortage.
Such possible dips notwithstanding, the cost of oil and other forms of energy will be rising inexorably for the short term. The only question is, how fast?
Little of the Carter administration's energy legislation now pending on Capitol Hill would really affect the pace of energy price inflation for years to come, but it would greatly affect who gets the income from the higher price of oil.
Congress seems certain to enact some form of windfall tax to recapture for the government a portion of that $27 billion each year in addition to what would be paid in the form of royalties or through the regular corporate or personal income tax.
And several committees were slowly moving forward on a number of different parts of Carter's program.
With Carter's agreement last week to accept a slower start on production of synthetic liquid fuels from shale, coal and organic materials than intended in his $88 billion proposal, approval seemed assured. While there is still a sharp debate about just how far to go in waiving substantive and procedural environmental requirements in granting permits for energy production, it also seemed clear that some speed-up would get the congressional nod.
Meanwhile, Carter also proposed using $1.6 billion this winter to help poor people pay their heating oil bills. At the White House, his advisers were debating whether to expand the program to include households with incomes of $20,000 to $30,000.
That kind of help, however valuable it may be to housholds hard hit by heating oil price hikes, it will do little to offset the full impact of higher energy costs on the economy. Those costs are largely to blame for the nation's recession, which is not going to end until they stop going up so fast.