OIL DEALERS and speculators have apparently decided that there won't be a war in the Persian Gulf this week. Oil prices, having shot upward $10 a barrel since the invasion of Kuwait, swooped back downward yesterday by $4. That latest change is nice for the industrial world, since winter is coming. But will the present price hold?
Hardly. It's going to continue to fluctuate with every new development -- the OPEC meeting that either will or won't take place this week in Vienna, every military move in the Middle East, every change in production policy by any major exporter. But these swings are highly disruptive to the world's economy. Financial markets bounce wildly up and down. It's bad for the kind of steady, reliable economic growth that every government tries to maintain.
Brace yourself, therefore, for a flood of bright ideas to stabilize oil prices. Unfortunately, most have already been tried and found to do more harm than good. Price controls? President Nixon tried them in 1971, and the experiment turned into an unqualified disaster. The oil shortages of the 1970s and the gasoline lines were the result, not of OPEC price increases but of American price controls.
Oil markets work very much like grain markets, and there are some lessons to be learned from them. Government-owned grain surpluses do a lot to steady the prices of food, and the presence of the 590 million barrels of oil in the government's strategic reserves has helped damp the speculative swings in oil this summer. But the United States is unlikely ever to hold oil reserves large enough to operate as they do in the grain markets, opening automatically when the price hits a certain level.
The intractable reality is that one-fourth of the world's oil production, and two-thirds of its known reserves, are in the countries that border the Persian Gulf. Stabilizing world oil prices is impossible without stabilizing the politics of the Gulf region, a prospect which is as improbable as it is desirable. Perhaps it will happen sometime in the second half of the next century. In the meantime, the United States and all the industrial countries can best give a measure of protection to their economies by steadily cutting down the amounts of oil that they use. How? The most effective device -- you've heard it before, and it's still true -- is a tax on gasoline. But Americans have evidently not yet suffered enough disruption and economic distress to make the gas tax, in political terms, a real possibility.