Even though industrial nations made pledges at last June's summit in Tokyo to hold down purchases of crude oil on the "spot" market, the amount of oil sold there has continued to grow uncontrollably -- adding to upward pressure on world oil prices.
From 15 to 20 percent of the oil traded on world markets is now sold on the spot market, compared with 3 to 5 percent at the beginning of the year, according to international petroleum analyst Walter J. Levy.
Recently, White House and Energy Department officials estimated that the spot market -- one-time sales of crude oil not subject to long-term prices -- covered only 10 percent of oil traded internationally.
"The spot market brings out the worst instinct in everyone," Levy said in an interview.
Last week, Iran claimed that it had sold a "large shipment of oil at $45.30 a barrel on a spot basis, though most spot sales continue in the $35 to $40 range -- nearly twice the official price of the Organization of Petroleum Countries.
OPEC's official prices, set at the June meeting in Geneva, continue to average between $22 and $23.50 a barrel. In recent weeks, however, six of the cartel's 13 members raised their prices above the $23.50-a-barrel ceiling.
Levy has urged the Carter administration and other industrial leaders to stem the growth of the spot market, arguing that until spot prices are held down there is no hope of reducing upward price pressure. Continuing high spot prices "will destroy OPEC prices and lead to continued escalation," Levy said.
As an illustration of how much money can be made on the spot market, Levy said anyone with access to 100,000 barrels a day could earn up to $750 million over a year.
"Because the amount of money is so large, the possibility for corruption is enormous," Levy added.
Levy predicted that as a result of political uncertainty in the Mideast and Persian Gulf, and the continuing upward ratcheting of spot prices, OPEC will raise its prices to as much as $25.00 a barrel in December "at least, and perhaps $30.00 to $35.00 a barrel next year."
Since the beginning of this year, oil prices have risen by 70 per cent.
A growing number of OPEC members have diverted oil to spot markets that previously was allocated to the major oil companies on long-term contract. That amount, Levy said, now totals 6 million barrels a day. The Oil and Gas Journal, a respected trade publication, recently reported that as much as 1 million barrels a day out of the U.S. total 8 million barrels a day may be coming from the spot market.