A race to precious metals
At home and abroad, deep concerns about peace and war and about the future supply and price of oil are distorting economic behavior. Latest evidence is the skyrocketing price of gold, as a relative handful of moneyed investors -- fleeing the uncertainty of paper currencies -- push the precious metal above $600 an ounce.
"Panic," international economist Lawrence B. Krause said in a telephone interview, "appears first in precious metals, diamonds -- everything movable."
The price of such tangible assets soars, as speculators and investors -- both governmental and private -- liquidate holdings to which access might be lost through war, or whose value is shrinking.
The US dollar, for example, dropped sharply on European money markets -- reaching a record low against the West German mark -- as gold prices climbed.
Widespread unease over Soviet intentions in Afghanistan and elsewhere in the Middle East, coupled with the unresolved situation in Iran and the soaring price of oil -- all fuel both the gold rush and, more important, worldwide inflation.
Another manifestation of investor uncertainty, sparked by the movement of Soviet troops through Central Asia, is an abrupt drop in the US stock market.
Major oil suppliers to the United States -- including Venezuela, Libya, Indonesia, and Mexico -- continue to jack up the price of their oil, in some cases above $30 a barrel.
Several key suppliers of crude to the US, including Nigeria, Algeria, and Libya, are at the top of the price line charged by the 13 members of the Organization of Petroleum Exporting Countries (OPEC).
This means, an official of the Federal Reserve Board said, that the weighted average of oil flowing to the United States is about 75 cents a barrel more expensive than the world average of OPEC oil. Other sources place the differential higher.
Currently, lumping together contract and spot- market prices, OPEC oil averages about $27.50 a barrel, according to industry experts -- more than double the $13 prevailing at the end of 1978.
The escalating cost of foreign oil, government officials warn, hits the US economy triply hard -- boosting inflation, retarding growth, and throwing people out of work.
Only by cutting their use of oil, experts agree, can Americans shorten the period when high inflation rips holes in families' purchasing power.
"At best," says Paul A. Volcker, chairman of the Federal Reserve Board, "[The latest round of OPEC price hikes] has set back by a quarter or more progress against inflation."
The American economy, Mr. Volcker says, remains vulnerable to outside pressures, so long as "we are hostage to our dependence on foreign oil."
US oil imports, in the four weeks ending Dec. 21, 1979, the Department of Energy (DOE) reports, were somewhat below the comparable period of 1978.
Imports of crude oil were down by 1.4 percent, while imports of refined products -- gasoline, heating oil, and the like -- were a full 8.7 percent below the average for the same period of 1978.
This reflects the fact that Americans, responding to higher prices at the pump, are burning nearly 10 percent less gasoline than they were a year ago, and slightly less residential fuel oil. Use of residual, or heavy, fuel oil -- burned by factories and utilities -- is down by 2.4 percent, the DOE says.
This amount of conservation, while welcome, is not enough to halt the upward march of OPEC official prices. On the spot market, however -- where oil recently sold for as much as $45 a barrel -- there has been some softening, with prices now ranging in the "high 30s," according to Gary Ross of the Petroleum Industry Research Foundation Inc.