This week's announcement that Mexico and Kuwait are raising oil prices 10 percent is expected to set off a series of new increases in weeks ahead and virtually assures that the cartel will officially raise prices again in December.
"With the Kuwaits' move you can assume that the others will quickly follow suit," says Herman Franssen, an Energy Department analyst.
Already, in fact, the British government has notified the United States through diplomatic channels that its British National Oil Co. is planning to raise North Sea oil prices, according to State Department officials.
And, in a move that "stunned" the State Department, a BNOC official in London said recently that the company is considering demanding up to a year's payment in advance for oil shipments.
Both Kuwait and Mexico have added $2 a barrel to their prices. Mexico, which is not a member of the Organization of Petroleum Exporting Countries (OPEC), set its price at $24.60 -- well above the cartel's officially sanctioned ceiling of $23.50.
Oil executives say that in all likelihood the OPEC meeting next week in Caracas will add $2 to $3 a barrel to the official pricing structure, an increase that would boost domestic gasoline and refined petroleum prices 3 to 5 cents a gallon.
Such a rise would also add to the costs of President Carter's oil decontrol program, now under way, and could pose political problems for Carter during next year's Democratic presidential primaries.
"If anyone needs an additional justification to raise prices, the Kuwait announcement is it," says Larry Goldstein of the New York-based Petroleum Industry Reserch Foundation.
Still another reason oilmen view the Kuwait decision as critical is that Kuwait's oil is heavier and less desirable than other Persian Gulf crudes. Thus the increase, executives say, places extra pressure on Iraq, Iran, the United Arab Emirates and Saudi Arabia to charge more for higher quality oils they produce.
The Kuwati decision also follows Saudi Foreign Minister Saud Al Faisal's statements last week that his government is considering cutting production by 1 million barrels a day.
Since the first of the year world oil prices have risen more than 60 percent, the largest increase since the 1973 Arab oil embargo.
Ironically, the Kuwati and Mexican increases come just as the world oil market is returning to equilibrium and a full recovery from the Iranian oil shutdown earlier this year.
At Standard Oil Co. of California, Ken Haley says, "We expect to see a balance return to the market momentarily." Prices are continuing to move upward, Haley says, because "people are hedging -- they're out there scrambling for additional cargos."
Other factors tend to create a climate conducive to price rises. Domestic U.S. producers now receive up to $30 a barrel for uncontrolled oil, far more than the OPEC ceiling price. Canada is now charging $26.38 for some of its oil. Most important, the industry is still uncertain about further political upheaval in Iran that could choke off production there.
Even before the Mexican and Kuwati prices moves, there had been considerable sentiment among exporters for an increase.
Last month Nigeria notified its customers it was comtemplating a $3 rise, but did not go through with it.
Iraq, the second largest OPEC producer, in exchange for assuring that it will make oil available next year, is levying a "premium" that pushes its prices over $23.50.
One factor that continues to puzzle some analysts is that "spot" oil prices, for cargoes sold one at a time rather than under long-term contract, continue to run $8 to $9 a barrel above the official OPEC price.
At the same time, though, spot prices for refined products sold on the world market have begun to drop because stocks of heating oil and some other products are nearing surplus levels.
One reason offered for the continued hot spot price of crude is that even if the market were in total equilibrium, companies would still be competing to buy before OPEC boosts prices in December.