OPEC's Painful Squeeze

The leaders of the free world's seven strongest industrial nations were in the process of donning formal dress for a state dinner with Emperor Hirohito of Japan when aides brought the news that all of them had awaited with dread. On the other side of the globe in Geneva, the OPEC ministers had once again jacked up the world price of oil, and the bite was fully as bad as gloomy prophets had predicted—and perhaps worse. The cartel's complex system of base quotes and surcharges works out to an average price of between $20 and $21 per bbl.—up 15% just from last week, 50% since Jan. 1, and 1,000% from the $1.80 price at the start of the '70s.

"There is no one on earth who will fail to suffer from these extraordinary increases," proclaimed Jimmy Carter, with only mild hyperbole. He and the leaders of Britain, Canada, France, Italy, Japan and West Germany issued a communiqué spelling out why: "Unwarranted rises in oil prices mean more worldwide inflation and less [economic] growth. That will lead to more unemployment, more balance of payments difficulty, and [will] endanger stability. We deplore the [OPEC] decision."

But there was not much that the seven could agree on to contain the damage. For the moment, at least, OPEC has the industrial world over a barrel. The summiteers decided to hold imports from the oil cartel at about their present levels, in order to limit the flow of cash from their countries and, just possibly, dissuade the OPEC leaders from piling on yet more price boosts when they meet again, in December at the latest. That done—and very little it was—the seven summiteers disbanded. Carter, after a weekend visit to the U.S. military front lines in South Korea, canceled a planned three-day vacation in Hawaii and prepared to fly back to Washington Sunday night.

There he confronts the sourest and most apprehensive national mood to hang over a Fourth of July holiday in years. For millions of citizens penned at home by exasperating gasoline shortages, the only celebration will be a backyard barbecue—if the sporadic strikes by independent truckers protesting the scarcity and soaring price of diesel fuel do not cause new shortages at the supermarkets. Gas lines in Eastern cities are getting longer, despite the spread of odd-even sales restrictions, and the Tokyo agreement to limit petroleum imports obviously will do nothing to shorten them, since it is a scarcity of imported crude to refine that caused the lines in the first place.

Ahead lie two other prospects that will be considerably worsened by the OPEC move: