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Since 1970 the price that the producing countries receive for their crude has risen 72%, and the major multinational oil companies are committed to additional 10% price hikes in each of the next two years. In addition, they are negotiating with officials of the Organization of Petroleum Exporting Countries (OPEC) on yet another price increase that would compensate the exporters for the devaluation of the dollar in February. The price of interstate natural-gas shipments, which is regulated by the Federal Power Commission, has never been allowed to surpass 34¢ per 1,000 cu. ft. But if Congress votes to deregulate natural-gas prices in new contracts, as Nixon proposed, the economists expect prices eventually to rise much closer to their current free-market level in intrastate shipments. Recently, that has been as high as 560 per 1,000 cu. ft.—or 65% higher than the regulated price.
Next to food prices, there are few more visible forms of inflation than jumps in electric bills or in the tabs for tankfuls of gasoline. Moreover, industries that use inordinate quantities of energy—aluminum, for example—could be gravely injured by higher prices, and all manufactured goods would be affected to some extent.
By 1980, based on current prices and projected growth in demand, the nation's out-of-pocket expenditures for foreign oil might reach $17 billion annually v. $8 billion this year. That staggering annual outflow of dollars for oil is not inevitable, however. As Secretary of the Treasury George Shultz said at Nassau: "We must struggle against these projections so that they do not become accurate predictions." Another projection shows that between now and 1980 the oil-producing nations of the Middle East and North Africa alone stand to collect a quarter-trillion dollars for their natural riches, nearly all of it from Western Europe, Japan and the U.S. In fact, some of the smaller Middle Eastern nations are already accumulating funds roughly twice as fast as they can spend them. Marvels the State Department's energy expert, James E. Akins: "With the possible exception of Croesus, the world will never have seen anything quite like the wealth which is flowing and will continue to flow into the Persian Gulf." Speculation with these funds was partially responsible for the world's recent monetary crisis.
To help curb such imbalances, some politicians and economists are urging the Administration to take on the job of bargaining with oil-producing countries itself, rather than accept the price levels negotiated by the oil companies.
At the Nassau conference, Democratic Senator Henry Jackson declared: "The oil companies acting alone cannot be credible bargainers with OPEC." M.I.T. Economist Morris A. Adelman has gone even further, accusing the multinational oil firms of merely acting as tax-collection agents for the oil exporters. Both he and Jackson have suggested that the U.S. and other big oil consumers join together in a concerted diplomatic effort to break the OPEC cartel.
Actually, some of the potentially dire consequences of the energy crisis may be prevented by the ever higher prices of oil and gas. When a commodity becomes more expensive, it encourages its producers to increase supplies and at the same time pressures consumers to cut down their demand for it.