Like a great natural disaster, the oil drought caused by the Arabs' cutback on production spread ominously through the industrial nations last week. Despite glaring signals of severe shortages ahead, leading consumer countries from Germany to Japan were in disarray. They often worked at cross purposes as each scrambled to get energy supplies only for itself—at almost any cost. Meanwhile oil-producing countries outside the Middle East happily pushed up prices.
On top of Venezuela's 56% boost in its posted prices and Nigeria's announcement that it will almost double its prices, Indonesia announced a 20% rise, to about $6 a bbl. These increases are certain to send up the cost of U.S.-produced oil, which under Phase IV controls is held to an average of $4 per bbl. But "new" oil—all production of a well above last year's total—is exempt from controls, and it is now selling for $5.60 or more per bbl. By next year it is expected by independent producers to leap as high as $8. Indeed, Texas oilmen say that they have Government assurances that price regulations on all petroleum products will soon be loosened to give oil companies greater incentive to produce.
First Hop. American motorists felt the first pinch at the pump last week when gasoline prices rose between 1¢ and 4¢ per gal. By winter's end the price is expected to bound up to 50¢ per gal. v. about 40¢ now. Home heating fuel could climb as high as 40¢ per gal., almost double its current level, and jet fuel, kerosene, propane and other petroleum products will rise proportionately. Officials of the Cost of Living Council estimate that increases in the price of oil imports alone will inject about $5 billion of pure inflation into the economy, substantially raising already oppressive living costs. And, says COLC Staffer Charles Owens: "That is just the first hop of this frog."
Even more worrisome is the growing probability of acute fuel shortages caused by the Arabs' total embargo of oil shipments to the U.S. It is now estimated that the U.S. will have 2,000,000 to 3,000,000 bbl. less than the 17 million bbl. a day that it normally burns. The grim prospects for the months ahead: power brownouts, chilly homes and offices, shuttered schools and factories. The loss in production could range to billions of dollars (see story next page) and bring a rise in the unemployment rate, wiping out last month's encouraging .3% drop to 4.5%. At normal consumption rates, the heating-oil shortage will hit with devastating force in February, when Northeast fuel could run dangerously low.
Though there is no way to duck the impact of the shortages, it can be softened. Last week heating oil came under the Government's nationwide allocation plan to distribute fuel more equitably among and within the states. Propane has been subject to allocation for more than a month, though gasoline and crude oil are still exempt.