ONLY seven months ago, the world's 23 largest oil companies signed the last of a series of agreements that will give the chief oil-exporting nations an extra $25 billion over the next five years. In return for that staggering raise, officials of the producing nations promised not to demand any more money during the life of the contracts, raising hopes that the world's basic fuel would maintain fairly stable prices for the next half-decade. Yet last week both sides went back to the bargaining table. Although they disbanded temporarily without reaching any new agreement, the nearly inevitable result of their meetings in Geneva over the coming weeks will be new price increases. The raises will hit consumers in Europe, Japan and the U.S. in the form of higher bills for gasoline, heating fuel and other products. They will also give much more economic power, and more international political clout, to the oil-exporting countries, most of which are in the Middle East.
These nations forced the companies into negotiations by displaying a rare unity. As recently as the mid-1960s, the oil companies could play the exporting countries off against one another, often driving down demands from one government by threatening to buy more oil from others. But in negotiations beginning in 1969, the eleven members of the Organization of Petroleum Exporting Countries (OPEC)* overcame their vast political and social differences. For the first time, they formed an oil suppliers' cartel, which now provides more than 85% of Europe's oil and 90% of Japan's. The U.S. imports 23% of its oil, mostly from Venezuela, and by some industry estimates will have to get 60% of its oil from abroad by 1980.
Drastic Action. One of OPEC's latest demands is for a price rise to make up for the 8.6% devaluation of the dollar, the currency in which oil payments are calculated. The oil countries called for a compensating increase of 8.6%, thereby setting a sort of black-gold standard paralleling the monetary one. In addition, the exporting nations are asking for " participation," meaning some form of ownership, in the companies' production operations.
For their part, oil-company negotiators point out that the contracts already provide for 2.5% annual increases, which will help make up for currency fluctuations. As for the participation demand, the companies are understandably wary of transferring part ownership under decree, even if OPEC governments pay for their share, as they have promised.
The producing nations seem certain to win concessions on both points. Seized by the spell of economic nationalism, more and more of them are threatening to take drastic action. The Iraqis have demanded a 20% share in the production facilities of Iraq Petroleum Co., which is owned by five international oil firms, including Jersey Standard. The ownership plan bogged down in the face of the company's compensation claims growing out of a government seizure ten years ago. To speed things up, Iraqi officials announced ominously that they were "scrutinizing closely" current financial records. In Venezuela, under a recently passed Petroleum Reversion Act, the government got authority to direct company exploration projects and start preparing for a total takeover in 1983, when oil leases held by foreign firms start to expire.