The nation has entered the early stages of a major oil price increase that will be the largest since the Organization of Petroleum Exporting Countries quadrupled prices during the 1973-74 oil embargo.
Houever, this massive increase is not coming from OPEC. It stems from U.S. policy: the decontrol of domestic oil prices, which President Carter ordered and Congress allowed.
Decontrol began quietly in July and will continue over the next two years. By then, domestic crude oil prices will have risen to the world level set by OPEC, an increase that will amount to more than 50 percent even if the cartel does not raise prices further.
Oil industry economists such as Ted Eck of Standard Oil Co. of Indiana say that decontrol will add 10 cents to the price of a gallon of gasoline and other petroleum products by October 1981.
By comparison, OPEC's price increase last June-- the largest since the 1973 embargo began-- raised oil prices by six cents a gallon.
Domestic oil sells for about$13 a barrel; the world price is about $21 a barrel. In effect, decontrol allows the price of domestic oil to rise to the cartel-set price.
Last April, uhen President Carter unveiled his decontrol package, he called for allowing domestic oil prices to rise gradually so Americans would "use less oil and pay more for it." The program assumes that as domestic oil prices rise, oil companies will have a greater incentive to search for and produce more oil, thus reducing the nation's reliance on imported petroleum.
Decontrol is expected to add billions of dollars to oil industry profits, and much more to total industry revenue.
According to current estimates used by the Joint Committee on Taxation, decontrol will add $118.6 billion to oil company revenues by the end of 1984, including $9.3 billion more in 1980 and $21.4 billion in 1981.
To sop up some of these revenues, Carter proposed a "windfall profits tax." The House has ueakened the tax proposal and the Senate is in the process of weakening it further, so that more money will stay in the companies' hands.
When Carter announced his decontrol plan, the head of the White House Council of Economic Advisers, Charles Schultze, told reporters that decontrol would raise gasoline and other fuel prices by four to five cents a gallon. Soon afterward, Stuart E. Eizenstat, the president's domestic policy adviser, said that decontrol would increase oil industry revenues by $15.4 billion from the time controls began being lifted last July until they finally expired in 1981.
These projections quickly were forgotten when OPEC announced its June price boost. Because the world price is now much higher, the price for domestic oil must rise much higher to equal it.
Neither the White House nor the Energy Department has issued an official updated account of the impact of decontrol on consumer costs and industry revenues. But a member of the Council of Economic Advisers, George Eads, concedes that because of OPEC's June price increase, decontrol will add eight cents a gallon to gasoline and other fuel prices.
However, industry estimates of the effects of decontrol are higher. Standard Oil of Indiana's Eck says the price increase for gasoline "will probably be 10 cents a gallon"-- assuming OPEC doesn't raise oil prices further-- "but who knows what OPEC will do?"
The process leading to oil decontrol is complex, partly because there are now about 21 pricing categories under which domestic oil is sold. Most of the nation's output of 8.6 million barrels a day falls under three categories: "old" oil, discovered before 1972, which sells for $6.30 a barrel; "new" oil, found after 1972, which sells for about $13 a barrel, and "stripper" oil, pumped from wells that produce less than 10 barrels a day, which sells at the world price.
If OPEC imposes yet another price increase, as many industry and administration analysts expect it will, the impact of decontrol on prices will be even greater.
Asked why the administration has not made public a new set of estimates of that impact, one senior official said, "The focus of thinking here has shifted from the effect of decontrol to the effect of higher oil prices from OPEC on the economy."
The largest increases under decontrol are expected to start rolling through the economy after the first of the year, when President Carter begins to run for reelection in earnest.
A harbinger of the impact of the coming increases was the Labor Department's announcement last week that the producer price index took its largest jump in nearly five years during September. The department labeled energy as the major cause.
Labor Department economist Andrew Clem said the rise was "partly due to the administration's phased deregulation of domestic petroleum prices."