WATCHING THE WORLD U.K. RESPONSE TO PRICES

Britain's beleaguered gasoline marketers need no reminders about the power of the press.

From the first post-Kuwaiti invasion price increase, oil companies have been the target for a virulent campaign by big tabloid newspapers.

In the face of columns full of allegations of price gouging and calls for a windfall profits tax companies have become more and more defensive to the point that they seem reluctant to allow prices to keep pace with rising international crude levels.

Shell U.K. Ltd., one of the leading U.K. marketers, says it is losing l million ($1.94 million)/day as a result of pump prices lagging product costs.

PUBLIC OPINION UNCHANGED

Complex explanations of the principles of marginal pricing have failed to divert public opinion or the tabloid newspapers from the idea that oil companies are profiteering.

Reminders that a recent lengthy inquiry into the gasoline business by Britain's Monopolies and Mergers Commission (MMC) gave oil companies a clean bill of health have done little to dispel this unfavorable view of the industry.

Prime Minister Thatcher, normally a vocal defender of market forces, did little to help the companies' cause with her only public pronouncement on the subject, a plea that gasoline price increases should be no more than strictly necessary.

That was followed by an urgent request from Gordon Borrie, director general of Britain's Office of Fair Trading (OFT), for an explanation of gasoline price policies that have been followed in the U.K. by Shell, Esso U.K., BP Oil, Texaco Ltd., and Mobil U.K. since the beginning of the Middle East crisis.

Borrie wants to judge the extent to which those policies have differed, if at all, from the pricing mechanism described in the MMC report on gasoline marketing published in February.

Companies have welcomed this opportunity to justify their actions. And, not unnaturally, the general press sees the OFT request as the first step toward the successful culmination of its campaign.

Unfortunately for the companies, the only significant U.K. press support for their policies has come from low circulation publications like the Financial Times and The Economist.

FINANCIAL TIMES' ADVICE

A Financial Times editorial gave a stout defense of marginal pricing-a case of preaching to the converted. It also attacked demands for a windfall profits tax as a triumph of short sighted populism over logic.

Governments, which listen to the Financial Times arguments even if they don't always act on them, should, the editorial said, refuse to compound a misfortune with a mistake. If governments wish to contain the price of oil, taxes and state owned petroleum stocks-not controls-should come into play.

Governments should not impose an embargo on Iraqi and Kuwaiti oil, then frustrate the price response that will be the best way of adjusting to it, the editorial said.

That's excellent advice.