This year's OPEC price increases will have cost the United States 1.3 million jobs and lifted consumer prices 5 1/2 percentage points by the end of the year, the Carter administration estimated yesterday.
OPEC's failure to set a new price framework at its meeting this week in Caracas means the United States faces a growing "uncertainty about further price increases in the future," Energy Secretary Charles Duncan said.
The price increases announced so far by most members of the Organization of Petroleum Exporting Countries (OPEC), coupled with that new uncertainty, Duncan added, constitute "a threat to our national security and economic well-being."
Duncan said these latest price increases would lift gasoline prices from 4 to 8 cents a gallon and home heating oil prices from 3 to 7 cents a gallon. Some of those price increases occurred this week as a number of major oil companies, including Exxon, Chevron, Texaco and Gulf, boosted gasoline prices by 3 cents to 6 cents a gallon.
"Since the OPEC nations are free to raise their prices." Duncan said, the only way to stabilize the world oil market is for the consuming nations to cut consumption. Even if the United States and other oil importing countries succeeded in that, Duncan acknowledged, he has no assurances that OPEC might not cut oil production to keep the market tight.
The United States, which for years has been hoping the OPEC cartel would disintegrate, finds itself in the ironic position of wishing, for the moment at least, that the cartel's price discipline could have been reestablished. The uncertainty about oil production in Iran has turned the tables, according to experts.
Duncan said the latest set of price increases will shortly raise the cost of importing oil to the United States from an average of about $25 a barrel last month to at least $28 a barrel and perhaps $30 a barrel if some producers raise their prices again. At the beginning of 1979, Duncan noted, the price of imports, not including trasnportation, was $13 a barrel.
The Council of Economic Advisers estimated the 1979 OPEC increases have added 2.4 percentage points to the inflation rate this year and will boost it 3.1 percentage points in 1980.
The most recent increases alone will add one percentage point to the inflation rate in 1980 and reduce employment by about 250,000 jobs by the fourth quarter of the year, the CEA said.
Because of this year's oil price increases, the U.S. oil import bill will rise by at least $38 billion next year, the CEA continued. The total bill will be more than $80 billion, other analysts said.
The depressing effect of the higher prices on economic activity will slice $82 billion from gross national product in the fourth quarter of 1980, according to the CEA estimates. While the CEA gave no figure for GNP a year from now, other forecasters predict it will be in the neighborhood of $2,625 billion.
Duncan emphasized the administration's conviction that any cuts in oil consumption ought to fall on gaoline where "discretionary use" is greatest.
The administration is considering several possible ways to cut gasoline use, including a large increase in gasoline taxes, rationing or imposition of a fee on oil imports, the cost of which would be reflected solely in gasoline prices. The last might be accomplished without new legislation, administration officials believe.
"I would not say we are any closer to making any decisions on demand restraint measures" as a result of the recent price increases or the inability of OPEC to set a price ceiling, Duncan said.
Leslie Goldman, assistant energy secretary for international affairs, said the "most significant aspect" of the Caracas meeting is that "the ball is in our court, so to speak." The failure of OPEC to set a price ceiling means "the potential for price increases" is much greater.
If consumption can be cut, however, further price increases might be forestalled, he said. With about 20 percent of U.S. oil import being pruchased on the spot market, where crude is trading for between $40 and 50 a barrel, it is particularly important to reduce demand, Goldman added.
The administration is concerned that OPEC members might start leapfrogging each other's prices as they did in the first half of this year. Should that happen, warned one oil analyst, in New York, investment banker Joseph Tovey, "Saudi Arabia will regretfully announce it has to raise its prices for reasons of solidarity."
During 1980, two other factors in addition to the cost of imported oil will be affecting petroleum product prices: decontrol of domestic crude oil prices and the level of refiner and dealer margins.