Reagan's energy plan is likely to fuel a jump in prices at the pump
The incoming Reagan administration appears to be ready to hand US motorists a bigger tab for fueling the family car. Martin Anderson, chief of policy development for President-elect Reagan, told the New York Times in a recent interview that Mr. Reagan would try to accelerate decontrol of domestic crude oil "early" in his administration by executive order.
Such a move could hike with the stroke of a pen the price of gasoline by 5 to 11 cents a gallon.
Currently, price controls on crude oil are being phased out gradually through Sept. 30. Approximately 70 percent of US crude has been decontrolled so far, according to US Departmetn of Energy (DOE) estimates. Because the phase-out of controls is gradual, so is the increase in gasoline prices.
According to a new DOE study, decontrolling all domestic crude oil Feb. 1 will result in a "5 to 10 cents a gallon" increase. Heating oil would rise by 4 to 10 cents a gallon.
Jim DeNike, a Shell Oil Company vice-president, says that immediate decontrol of domestic crude prices would add from 7 to 11 cents a gallon onto the price of gasoline.
Like most major oil company executives, Mr. DeNike firmly believes that immediate decontrol will help spur increased exploration and production. But he acknowledges that the decision also will take its toll on consumers' pocketbooks.
"According to our calculations," he continued, "if you have 'instant decontrol' [what Reagan transition team advisers are recommending for Feb. 1] and the decontrolled price goes to the present selling price of decontrolled domestic oil, we expect an increase of 7 cents a gallon on gasoline. But if you assume the price immediately goes to the world price of crude oil, gasoline could go up as much as 11 cents a gallon."
However, if the price continues to be decontrolled gradually, consumers could expect to pay an average of a penny per gallon more each month, he explained.
This projected price increase for gasoline does not include expected OPEC (Organization of Petroleum Exporting Countries) price increases this spring. Nor does this price reflect much of OPEC's December decision to raised crude oil prices by $4 to $36 a barrel. According to DeNike and other oil analysts, these increased costs have not been fully passed to the consumer.
Economists for another major oil company calculate that their firm's crude oil prices would rise from 5 to 7 cents a gallon if domestic crude oil prices were decontrolled feb. 1. A company spokesman says that the extent to which refiners would pass the price increases to consumers depends on supply and demand factors.
On Dec. 31, 1980, motorists were paying an average of about 17 cents more per gallon of "full service" regular gasoline than they were on Jan. 1 the same year , according to the American Automobile Association (AAA). But seen in prespective, this was a year of relatively mild increases. According to a recent DOE study, gasoline prices rose on average by 41.8 cents a gallon between January 1979 and January 1980. The AAA's most recent figure for the average price of full service regular is $1.25 a gallon.
Between January 1979 and January 1980 the price of domestic crude oil increased 20.9 cents a gallon, according to a recent DOE report. Experts say two factors may help moderate price increases: the demand-dampening effects of continued recession and conservation. Such reduced demand was reflected in figures from the DOE showing an 18 percent drop in "year-to-date" crude oil imports as of October 1980.
"Total free world petroleum consumption in 1981 will be 2 percent below the 1980 level," according to projections by Shell Oil Company economists. On the other hand, analysts almost across the board say that, barring unforeseen circumstances in the Mideast, oil supplies will be more than adequate all this year if Saudi Arabia continues to suppl y roughly the same levels of crude.