(2 of 6)
In either case, the increase has menacing consequences for the oil-burning world. It will further fan the inflation that is raging at double-digit fury in the U.S., Britain, France and Italy. U.S. Treasury Secretary Michael Blumenthal estimates that petroleum increases alone have so far this year jacked up the inflation rate by 2.5% in the industrial countries. A further $5.45-a-bbl. boost is likely to siphon an additional $80 billion a year out of the major industrial nations, reducing their citizens' ability to buy food, clothes, houses—indeed, everything except oil. Result: further slowing of growth rates that have only recently begun to pick up (see ECONOMY & BUSINESS), and increasing unemployment.
Equally troublesome, the OPEC countries show no disposition to raise production to ease the shortages. Quite the contrary: they know the shortages are what enable them to charge more for oil than anyone would have dreamed possible as the '70s began (the 1970 price per bbl. was $1.80). Saudi Arabia's Crown Prince Fahd last week shot down a hopeful rumor that his country would increase production, and Iran is holding exports to barely half of prerevolutionary levels. Oil-industry publications buzz with talk of further cutbacks in Algeria and Libya.
Against that background, the heads of government of the non-Communist world's seven strongest industrial powers —Britain, Canada, France, Italy, Japan, West Germany and the U.S.—will convene Thursday in Tokyo's ornate Akasaka Palace to consider what they might do. The meeting, fifth in a series of annual summits devoted to economics, was scheduled before the latest oil crisis broke, but it will be so dominated by petroleum worries that it is being called the energy summit. For Jimmy Carter, the meeting will be especially critical; American voters are far more irate about the gasoline shortage than they are pleased by any diplomatic triumph the President might claim in negotiating a SALT II treaty.
Unfortunately, Carter and his confreres are unlikely to form anything resembling a tough united front to bargain with OPEC. Diplomats drawing up proposals for the meeting have simply been unable to devise measures that could both win agreement and save on oil bills without cutting economic growth severely.
Sighs a U.S. official: "We have no firm ideas, and it would be impossible to get everyone to agree even if we did."
The planners have discarded as all but unworkable various schemes to form a kind of consumers' cartel to negotiate with OPEC, or to put a ceiling on the price the seven countries would permit corporations to pay for oil on the Rotterdam "spot" market (users bid there for supplies not tied up under long-term contracts, and prices have shot as high as $40 per bbl.). French President Valery Giscard d'Estaing, speaking on behalf of the European Community, outlined a plan to freeze European oil imports at last year's level and to "dissuade companies from lending themselves to transactions at excessive prices" in Rotterdam. But that stops well short of Giscard's earlier ideas to set specific, country-by-country import ceilings, and to put a flat ban on high-priced dealings in Rotterdam.