Consumers feel twin blows: OPEC hikes, US decontrol
Two weeks ago it was a wave of red, white, and blue as the Reagans headed for the White House after the inaugural parade. Then it was a wave of yellow-ribbon celebrations for the returning hostages.
But this week it's a not-so-festive, not-so- welcome wave of oil price increases jolting consumers across the nation.
Since President Reagan moved for decontrol of domestic crude oil and gasoline prices Jan. 28, major oil companies have announced continuous price hikes, averaging about five cents.
Consumers will be stuck with paying over $1 billion for the decontrol move, according to a recent Lundberg Letter, a weekly petroleum report. "We estimate the public will be paying an additional $1.4 billion on all gas sold under the accelerated decontrol move," says Mark Emond, editor of the publication.
If President Reagan had waited to phase out decontrol as planned by the Carter administration for Sept. 30, consumers would have been free of the extra charge, he says.
Prices are rising much faster than the White House expected when US Energy Secretary James B. Edwards announced last week that increases under decontrol would be only "three to five cents."
A study by Lundberg indicates gasoline prices at the pump will jump 16 cents by October, from the current national average of $1.26 a gallon to $1.41 a gallon. The Department of Energy estimates decontrol will boost prices up to 12 cents this year, on top of OPEC-related price hikes.
New England households alone will pay an average of $75 more this year on gasoline and home heating oil with decontrol coming immediately instead of in the fall, according to a report released this week by the New England Congressional Caucus.
"The total impact on New England consumers and industry is estimated at $725 million as a result of decontrol," says Rob Pratt, executive director of the caucus.
In a debate on decontrol between William T. Slick, vice-president of Exxon and US Rep. Tobey Moffett (D) of Connecticut Feb. 5 at the Consumer Federation of America's annual assembly in Washington, the congressman charged that immediate decontrol "is a disaster with a capital 'D' for millions and millions of people in this country. . . .At a time when we're supposed to be battling inflation we're simply adding to inflation."
Mr. Moffett allowed that decontrol puts more pressure on consumers to conserve and makes alternative energy sources more feasible, then added: "But at what cost? There are millions of people eligible for no help at all and we all know that the token fuel-assistance programs are about to be slashed."
The Connecticut congressman says he expects home heating oil in New England, now nearing $1.30 a gallon, to reach $1.50 by the end of the winter.
However, economists are sticking to their predictions that oil decontrol will only add one-half of 1 percent to the consumer price index (CPI) in 1981. "We are predicting that the price hikes will be magnified in the second and third quarters," says Cary Leahey, senior economist at Data Resources Inc., a forecasting company, "but will only add half a percent onto the CPI this year." He adds that "it depends on how quickly prices get passed through to the consumer and on how tight the wholesale and retail markets are."