The Organization of Petroleum Exporting Countries today announced a 9 percent increase in oil prices-more than twice that previously planned-and for the first time gave approval for each country to impose its own additional surcharges.
The 9 percent increase, effective Sunday, will raise the basic price of a barrel of oil to #14.54. Under a four stage increase adopted by OPEC three months ago, that price was not to have been reached until Oct. 1.
The increase will cost Amercians about $4.3 billion this year, adding more than 4 cents a gallon to gasoline and home heating oil prices, according to analysts. But the effect of the surcharges, which some countries said could be as much as $4 a barrel, can not be predicted.
The OPEC decision will push U.S. inflation, already at double-digit rates, up by another 0.3 percent or or 0.4 percent.
(In Washington, the State Department critcized the price increase as "untimely and unjustified." Spokesman Hodding Carter expressed the Carter administration's "deep regret" that OPEC decided to "take advantage" of present tight market conditions.)
In endorsing the right of each member to impose as high an additional surcharge as it wishes, the oil ministers took an action that could produce something of an officially condoned free-for-all in world oil markets.
The decision is viewed as having ushered in important new changes in OPEC operations that may leave the future of oil prices more unpredictable than before.
In Abu Dhabi in December, OPEC agreed on a formula of announcing increases in advance and adopting yearly price schedules. This formula has been effectively scrapped, and two high OPEC officials said today that there is no way to predict whether there will be additional quarterly increases in July and October.
Another OPEC meeting, officials said, is to be held here in June.
Announcing the decision after a day-and-a-half of closed-door meetings here, OPEC Secretary General Rene Ortiz of Ecuador portrayed the basic price increase as "a moderate and modest adjustment" that reflected OPEC's "responsibility to help maintain the appropriate conditions for a continued and sustained growth of the world economy."
OPEC President Mana Saeed Otaiba of the United Arab Emirates, said he thought OPEC "had done an excellent job in not allowing the world to suffer from the shortage" of some 5 million barrels a day during the upheaval caused by the Iranian revolution.
The meeting here was originally supposed to be just a consultative gathering to dicuss how to deal with the disruption in world oil markets caused by the shot-off for more than two months of Iranian oil exports. With the supply shortages, prices soared as high as $23 a barrel on the unofficial "spot markets" and OPEC claims many oil companies and traders were making windfall profits.
The price of OPEC crude oil had been planned to rise Sunday to $13.84 per barrel, and increase of 3.8 percent from the present price. This rise had been part of established quarterly increases announced at the last OPEC meeting in December.
Today, however, the scheduled final 1979 price of $14.54, was put into effect six mounths early.
Since several militant OPEC countries were pushing for even higher increases in the basic price, the decision reached today is a victory of sorts for the moderate majority, led by Saudi arabia.
Iranian delegate Hassan nazih told a news conference here tonight that "the majority" of OPEC members decided to apply surcharges. These generally have been described by delegates as about $1.20 a barrel, a fee that would raise the barrel price to $15.75, close to the lower end of the sport market prices recently being quoted.
There was, however, considerable confusion in the immediate aftermath of the meeting, with very few ministers stating their country's intentions o the surcharge and various contradictory reports floating around.
Saudi Arabia, which produces almost a third of OPEC's oil, will not add a surcharge its oil minister, Sheik Zaki Yamani, said.
The oil minister of Qatar suggested that surcharges might go to $2 or $4 a barrel in some contries, an indication of where the open-edned new of official policy might lead.
Iranian officials pointed out that many OPEC countries have been using surcharges for many months during the Iranian crisis.
The extra charges, OPEC contends, are justified as moves to stabilize prices eventually at more realistic levels and reduce the temptation of sellers to reap profits on the uncontrolled spot market.
Yet the ministers here rejected suggestions that they were merely seeking to take over the profiteering policies that they have been accusing the oil companies and traders of engaging in on the spot market. OPEC claims that even by conservative measurements of inflation, a price of roughly $16 per barrel is justified.
It was unclear how much agreement there was within the meeting to reduce OPEC oil exports gradually as the Iranian pumps begin to operate again, but at levels below the 6 million barrels a day exported when the shah was in power.
Cutting back production would be one way to keep supplies tight and underpin the higher prices announced today.
What appears to have taken place is an informal agreement to cut back. Yamani said Saudia Arabia would reduce its production if Iranian exports resume sufficiently.
The iranian oil minister said that all the members generally agreed to cut back as iranian production increases. He singled out Iraq, Kuwait and Saudi Arabia.
Iraq-at the moment OPEC's second largest exporter-later confirmed its intention to cut back gradually and Kuwait said that "nobody is anxious to produce too much."
OPEC in the past has stayed away from any firm coordinated production policy among members.
Iran's Nazih said that when he talks of asking OPEC members to reduce production he doesn't "mean it as a policy of creating shortages, but rather as a means to seek balance and to encourage conservation" in the industrialized consuming countries.
Nazih said Iran had not fixed any resumed production figures yet and repeated Tehran's claims that the eventual level will be based on Iranian interests and not on outside demand.
In announcing the "modest" price adjustment, Secretary General Ortiz said such a description was valid because of the "large gaps that currently exist between prices prevailing in the open market and OPEC official selling prices."
The communique also expressed "high concern about the price speculation practics on the part of the major and trading oil companies in the open market, to the detriment of both producers and consumers, by reaping unjustified windfall profits which are not warranted by OPEC prices."
Several delegates suggested action would be taken against such alleged price gouging companies. They said that unless the process is stopped, new basic price increases would be necessary