In Tokyo, Japan, in particular, found it hard to agree to the limit on imports. According to Schmidt, the countries of the European Community, the United States, and Canada were already aware that they would have to put considerable restrictions on and make considerable adjustments to their national economics. The Federal Republic is no longer free in its oil import policies, the federal chancellor admitted, but it has to make the very same sacrifice. Schmidt said that they succeeded in finding a fair equalization of burdens in Tokyo. The fixing of different oil import limits [for different countries] takes the various structures of individual national economies into account. There is no standard recipe for all.
Oil Register: Educational Effect
Schmidt (who in principle supports price-setting for gasoline, like heating oil, through the market rather than government authorities, and who wants to maintain it for as long as possible) expects that the agreed-upon international oil register will serve over time to “unmask those companies that previously pushed up prices in an irresponsible way through individual actions on the spot markets.” If the OECD, for example, publicly reprimands a multinational or national oil company, and backs this up with figures and data from the register, then it won’t be without effect – at least this is what the chancellor hopes. On the other hand, however, he warned of price hysteria and attempts to cheat by getting around the higher energy prices.
When asked about the necessity of a dialogue with OPEC, the chancellor said that those parts of the Tokyo communiqué that pertain to oil producers weren’t originally supposed to include “such harsh language.” The wording of OPEC’s Geneva price decision led to a change, however. Nevertheless, at the same time, the concluding declaration in Tokyo also made clear that there was a willingness to negotiate with the oil suppliers. “I would like to say, though, that I don’t think much of mammoth conferences, like the ones just held in Tokyo and Geneva.” The chancellor also hopes that the World Economic Summit will become a less elaborate event. He expects that the next meeting on the island of San Giorgio in the Venetian Lagoon will already provide a more intimate context.
Avoiding Deflationary Risks
With regard to the recent return of a stronger upward price trend in the Federal Republic, the chancellor thinks little of attempting to counter or even reverse this increase in the cost of living, which is dictated by oil prices, through monetary or budgetary actions. Such a measure would have a deflationary effect on the Federal Republic – with all the attendant consequences for employment and growth. But it would be at least equally harmful to try to make up for the oil-related decrease in real income through nominal wage and salary increases. “That kind of policy would lead directly to an inflationary development.” Apparently, examples of this can be found in other countries.
In the short term, as Schmidt explained, economic policy has no workable cure-all, either in theory or in practice, to counter the effects of the increase in the oil price; rather, it can offer at best some possibilities for greater equilibrium in the medium or long term. In any case, printing more money in order to pay higher oil prices was not a solution. The growth in affluence will be slowed as a result of the most recent OPEC decisions to accelerate the rise in oil prices, but it won’t come to a halt.
Source: Franz Thoma, “Vorrang für Ölsparen und neue Technologien” [“Giving Priority to Saving Oil and New Technologies”], Süddeutsche Zeitung, July 2, 1979.
Translation: Allison Brown