Rejecting pleas from the Department of Energy, Ashland Oil Inc. has resumed buying oil from Iran at prices estimated at more than $18 a barrel, likely adding new upward pressure on world oil prices.
Ashland is the first American oil company to purchase oil from Iran since political turmoil shut off exports nine weeks ago.
An announcement issued yesterday by Ashland, the nation's largest independent oil refiner, said only that the company had paid prices somewhat higher than the world's listed price of about $13.50 a barrel. Industry and government sources pegged the price at more than $18 a barrel.
The oil is to be shipped from the Persian Gulf next week.
Administration officials say Ashland was urged by the Energy Department not to agree to the $18-to $20-a-barrel price that the National Iranian Oil Co. said this week it wanted for its restored oil exports.
DOE and State Department officials say, privately, that by agreeing to such a price Ashland would be adding new pressure on prices that have already allowed six of the 13 oil cartel members to raise oil or product prices above official market levels.
"It was unfortunate, because spot prices were beginning to deop," one Energy Department official said, adding, "The temptation Ashland is succumbing to has affected a lot of other people."
Meanwhile, John Treat, one of DOE's leading interntional oil specialists, said, "We are pleased that Iran is willing to sell to U.S. companies, but the question still is at what price."
Executives at a number of major oil companies that formerly operated in Iran, however, take a harsher view.
"This could blow the lid off prices," one said.
Another top international oil executive, who asked not to be quoted by name, said, "I believe that the danger is real for higher prices, but on the other hand, [Engery Secretary James R.] Schlesinger has said OPEC prices could go to $18 by the end of the year."
The oil companies and administration officials also were quick to point out that the last were quick to point out that the last time Iran held an auction, Dec. 17, 1973, Ashland bid more than $17 a barrel for oil when the Organization of Petroleum Exporting Countries official price was $5.03 a barrel.
Shortly afterward, the shah, then secure on Iran's Peacock Throne, called for the other OPEC states to adopt a $20-a-barrel price at their next meeting during the Arab oil embargo. Because of pressure from the Saudis and other more moderate exporters, OPEC agreed to a two-fold increase, doubling the cartel's official price from $5.03 to $11.65 a barrel in the next weeks.
Oil executives and administration officials say that Ashland's high bid of $17 a barrel had significant effect on buying psychology then, and was cited by many OPEC countries as a sign that western companies were willing to pay steeper prices.
Ashland spokesman Dan Lacy said, "While prices are somewhat higher then official OPEC prices, these prices are considerably below the spot prices many of the major oil companies are now paying to obtain crude supplies."
The Kentucky-based company is the nation's 15th largest oil company, operates seven refineries, and sells oil products in 35 states.
Lacy said Ashland is buying two-thirds of its oil from foreign suppliers, with 43 percent coming from cartel states.
Ashland was not a member of the 14-company western oil consortium that oversaw the production and bought most of Iran's more than 6 million barrels of daily oil production before exports ended Dec. 26. Tuesday, Hassan Nazih, head of Tehran's national oil company, said that the consortium would no longer have a preferential call on Iranhs oil.
Over recent months Ashland sold off its remaining domestic oil fields, and is now totally dependent on the oil suppliers in the United States and Abroad.
Before the shutdown, Ashland was buying nearly 100,000 barrels a day from Iran. Its other oil suppliers include Indonesia, Algeria and Mexico. Recently, according to the Ashland officials, the company secured an expanded assurance of 90,000 barrels a day in long-term supplies from Mexico.
Before the political turmoil in Iran, which has stretched world oil markets taut and has sent some spot prices up to $23.50 a barrel, Iran was Ashland's largest oil supplier.
While Ashland is the first American company to begin buying oil from Iran under long-term contract, Ashland had strong ties with the shah's government in the past.
In 1972, Ashland proposed allowing Iran to acquire an interest in the company's U.S. properties in exchange for a long-term assurance for oil. Months after it was announced, however, the deal came a cropper.