Still another large oil price increase will begin to take hold in earnest today, but this one is not coming from OPEC; it was decreed by President Carter.
Carter last spring ordered the gradual removal of price controls from oil produced in this country.
The main part of that process begins today.
Before it is over in October 1981, it will cost consumers at least 10 cents and possibly 15 cents a gallon more for gasoline, home heating oil and other petroleum products. In 1980, it will cost nearly as much as the last price increases that members of the Organization of Petroleum Exporting Countries just promulgated.
This government-granted price increase became an issue last year between Carter and Congress; it was to recover part of the proceeds from decontrol that Carter proposed his oil tax, still pending in a House-Senate conference.
The price increase has also become perhaps the leading issue between Carter and his top challenger for the Democratic presidential nomination, Sen. Edward M. Kennedy (D-Mass.). Kennedy regularly blasts the president for driving up further the energy prices that are already the bane of the economy.
But Carter defends his decision, mainly on grounds that the higher prices are necessary to deter consumption, also because they will allow the government to dismantle a cumbersome regulatory system that has seriously distorted the American oil market.
His aides also ask this question in response to Kennedy: how would the senator deter consumption, if not through higher prices? Most experts say that the only realistic alternative is to limit use by law, which means some form of rationing. Kennedy so far has stopped well short of that.
Today, U.S. oil producers are getting about $125 million a day less than they would if there were no controls. About 6.9 million of the 8.5 million barrels produced each day are still subject to controls.
Calculating the exact cost to consumers from decontrol is an exceedingly complex job involving assumptions about world oil prices, profit margins at refineries as well as the corner gas station, and the normal decline in production from older oil wells.
The White House announced yesterday that Saturday Carter signed an executive order delaying one step in decontrol of oil from so-called marginal wells until Congress completes action on the oil tax. Most of the oil from such wells was decontrolled in June.
A top White House aide called the minor delay "a shot across the bow" of Congress to remind conferees that decontrol and the tax are, in fact, linked even though decontrol is already under way.
Several White House and other administration officials stressed, however, Carter has no intention of backing away from decontrol no matter how much political heat the president gets from Kennedy or other sources.
Once the latest OPEC price increases are fully reflected in the prices of crude oil reaching the United States, some administration energy experts believe the average cost of crude to U.S. refiners will be in the neighborhood of $32 a barrel.
In comparison, so-caller lower tier domestic crude oil -- essentially oil from wells discovered before 1973 -- will be selling for about $6.80 a barrel this month. Upper tier oil, mostly that discovered since 1973, will go for about $14.50 a barrel.
In other words, lower tier oil is selling for about $25 less than uncontrolled oil, and upper tier is about $17.50 less.
Of course, when Carter decided in April to begin the decontrol process -- something his economic advisers had been urging for some time -- the gap between those prices and world prices was far smaller. In April, U.S. refiners paid an average of less than $16 a barrel for imported oil, not including transportation. That was only about $3 a barrel more than the upper tier price in those days, and about $10 more than the lower tier price.
The enormous increase in that gap is due to the surge in world oil prices, including the increases announced last month beginning with a $6 a barrel boost by Saudi Arabia. In one sense, the OPEC hikes have sharply increased the ultimate cost of decontrol.
But it would be wrong to blame all of the coming increases in U.S. crude prices on decontrol. The average price of upper and lower tier crude was already going up 10 percent a year under controls. And about 17 percent of U.S. production was already free of controls, coming either from stripper wells -- wells producing less than 10 barrels a day -- or from government-owned naval petroleum reserves.
Under executive orders issued during 1979, all oil coming from wells drilled since Jan. 1 is free of controls. According to Department of Energy estimates, about 200,000 barrels a day of that oil is now being produced.
In addition, about 750,000 barrels a day has been moved from the lower tier to the upper tier classification because of partial decontrol of marginal wells. Other amounts of oil were switched from one tier to another under other decontrol provision.
As of today, however, 4.6 percent of all upper tier oil will be decontrolled each month between now and October 1981. In February, 9.2 percent of all upper tier oil can be sold for the market price, and so on.
Since lower tier oil is moving to the upper tier at a rate of about 3 percent a month, some part of the cheaper oil will, in effect, go all the way from $6.80 to $32 a barrel this month.
By one estimate, the part of decontrol beginning today will increase the total cost of crude oil to U.S. refiners by about $29 billion between now and the end of the decontrol period. Should world oil prices shoot up again, the figure would be higher.
Economists have been virtually unanimous in urging that domestic crude prices be allowed to rise to world levels. Controls, they said, encourage more consumption and, by lowering the average price of petroleum products, give OPEC more lee-way to raise its prices for crude.
Furthermore, artificially low prices for U.S. crude have delayed investment in alternative forms of energy such as solar and synthetic fuels from coal, they argue.
With controls, different barrels of oil carry different legal price tags. This has led to some selling of lower tier oil as higher priced upper tier or even imported oil.
And since different refiners normally would end up with different average costs for crude oil, an elaborate system of payments among refiners had to be set up to try to maintain a competitive balance.
Getting rid of all this, however, will be expensive to oil consumers. Administration officials, backed by most economists, are firmly convinced it is worth it.