Share this story
Close X
Switch to Desktop Site

What OPEC price hike means: gas a bit higher, recession a bit deeper

About these ads

Through the murk and gloom of OPEC's pricing disarray, one fact stands out: Oil prices will inch up again and, to that extent, more money will flow out of the United States, Japan, Europe, and developing nations into the treasuries of 13 oil- producing states.

Nonmembers of the Organization of Petroleum Exporting Countries (OPEC), including Britain, Norway, Canada, and Mexico, also will grow richer, because they price their own oil in line with the cartel.

The giant US economy, already mired in recession, will be given an additional shove downward, because more dollars that might have been spent by American consumers for goods and services at home will flow abroad.

The same will be true of other industrial nations, such as Japan and West Germany, that import part or all of thier oil, postponing further the day when the world economy, now in the doldrums, begins to perk up.

As for individual Americans, the price of gasoline and home heating oil may go up by 1.5 to 3 cents a gallon, depending on what OPEC's various members do with prices.

Because record-high stocks of gasoline exist now in the United States and dealers are competing for customers, the upward movement at the pump may be slight.

But this is only part of the story in analyzing the relationship between oil prices and the agreement -- or lack thereof -- just reached by the Organization of Petroleum Exporting Countries in Algiers.

The 13 cartel members set the "base price" of oil in a range between $28 a barrel (the current Saudi price) and $32, with "premiums" of up of $5 a barrel for higher-quality crudes.

Though the Saudis and the United Arab Emirates -- now at $31.56 a barrel -- say they will not go up to $32, other OPEC members may do so. Some already above that level may take advantage of the "premium" clause to inch their prices toward $37 a barrel.


Page:   1   |   2

Follow Stories Like This
Get the Monitor stories you care about delivered to your inbox.