Oil prices O.P.E.C. GIVES WARNING ON INFLATION

Press, Volume CXIV, Issue 33564, 19 June 1974, Page 13

Oil prices O.P.E.C. GIVES WARNING ON INFLATION

(N.Z.P.A .-Reuter—Copyright) QUITO, June 18. Industrialised countries have been warned that oil prices will go up again — and much faster — if they fail to contain the inflation eroding the purchasing power of the oil exporters’ revenue. Tins was the message spelt out by Iranian Finance Minister (Mr Jamshid Amouzegar) at the end of the three-day meeting of the Organisation of Petroleum Exporting Countries (0.P.E.C.).

Speaking to journalists last night, Mr Amouzegar said that the O.P.E.C. countries’ decision to impose a 2 per cent increase in the royalties they levy on major oil companies was symbolic. They also decided to freeze petroleum prices for a further three months from July 1. The royalty rise will add an insignificant 5c or 6c per barrel (35 imperial gallons or 159 litres) to the cost of oil. For the oil producers, this will add less than 1 per cent to their oil revenues, and cost the consumer — if passed on — a small fraction of 1 per cent per gallon.

The O.P.E.C. conference opened with more widelyvarying viewpoints in the delegations than ever before, conference sources said, and the final communique said openly that Saudi Arabia did not associate itself with the royalty increase.

According to old O.P.E.C. hands, it was the first time in about 10 years that a dissenting view was publicly expressed in a conference communique.

The oil exporters raised the posted price to its present level of SUS 11.65 per barrel early last year, after imposing a four-fold increase in the

last quarter of 1973 alone 1 when they stopped negotiat- i ing on prices with the multinational oil companies. t Posted prices are the yard- t stick used for calculating the t taxes and royalties which the t producer governments charge i the oil companies for extract- 1 ing oil, and which make up r more than 95 per cent of the cost of crude oil. i Five countries — Algeria, t Nigeria, Libya, Kuwait, and s Venezuela — fought hard for t a far larger increase in the I posted price which would j have meant adding nearly 10 < per cent to the cost of oil, i

They also called for a steep rise in oil company taxes. Mr Amouzegar stressed that O.P.E.C.’s restraint at a time of galloping inflation for the prices of goods they have to import came from a genuine concern that the world had not yet adjusted to the new higher levels. But he gave a warning that if by September the industrialised countries showed no sign of holding down the prices of manufactured goods, then O.P.E.C. would probably follow the over-all rate of inflation and increase oil prices by 10 per cent or more.