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Unclear Returns. Yet Kissinger's proposal was greeted skeptically by oil users and producers and its chances for broad acceptance seem uncertain at best. In Western Europe and Japan, which are far more dependent on OPEC oil than is the U.S., critics argue that the floor plan is mainly aimed at getting the rest of the industrial world to safeguard a big U.S. investment in costlier sources of energy. The critics fear that they would be locked into a long-term commitment to high-cost energy that would offer unclear returns far off in the future. Japan's Foreign Minister Kiichi Miyazawa said that he considered the floor plan "beyond the bounds of reason" for his country. The producing countries were cool too. OPEC leaders believe that only continued high prices will serve their dual purpose of building up purchasing power and preventing the rapid depletion of oil sources.
There is considerable doubt in and out of Washington about just how effective a floor price would be in promoting energy development, particularly in the U.S. Atlantic Richfield Co. and three other firms recently suspended a big oil-shale project in Colorado after cost estimates for a 50,000 bbl.-per-day plant jumped from $450 million to $800 million. A price of $7 for oil, concluded the Federal Energy Administration in its Project Independence Blueprint last fall, could boost consumption back to wasteful levels while providing only a slight stimulus to production, thus actually increasing U.S. dependence on foreign oil.
The long-term impact of Kissinger's floor on OPEC is equally uncertain. There are no signs that the cartel will break up soon. Its members have proved that they have the cohesiveness to cut oil production at sharply varying rates in order to maintain the $10.80 price. Over the past year, the OPEC nations as a whole reduced output by 21%. Some countries have cut back even more: Iraq by 27%, Kuwait by 39%, Libya by 72%. They may well reduce production further instead of competing among each other and slashing prices. The producers feel that they ultimately gain more by pumping less at the current high price than by pumping more at lower prices.
Sealed Bids. One vocal critic of the Kissinger floor plan, Economist Arthur Okun, argues that the consuming nations can best cope with OPEC by bargaining with them individually. If the consuming nations were to insist on, say, taking sealed bids for their oil-import needs, Okun says, some OPEC nations would be sure to start breaking the price line sooner or later. In any case, Okun worries, if the consuming countries try to deal with the producers as a bloc they might just "solidify the position of OPEC as a bargaining agent for its member nations."