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Gas Shortage
EMEL AKAN is a senior reporter for The Epoch Times in Washington. Previously, she worked in the financial sector as an investment banker at JPMorgan. Emel Akan
Are 1970s-Era Gas Lines Returning?
Economists warn fuel price controls would bring disaster for Americans
Gas prices continue to rise, topping historic highs, and there’s no imminent hope of relief in sight, according to sector analysts. The average price for a gallon of regular gasoline in the United States has now more than doubled since President Joe Biden took office.
Congressional Democrats and the Biden administration say a solution may be found by cracking down on Big Oil’s exploitative price increases at the pump.
Last month, House Democrats passed the Consumer Fuel Price Gouging Prevention Act, which empowers politicians and bureaucrats to bring civil action against gas companies that engage in “unconscionable pricing,” as defined by the bill.
The legislation grants the president the power to declare an energy emergency for up to 30 days, with the option to extend the declaration.
“So essentially, what this bill would do is, for an unlimited duration, create a system where politicians and bureaucrats can decide what the appropriate level for prices are and fine people,” according to Jack Spencer, senior research fellow for energy and environmental policy at the Heritage Foundation.
Spencer called the measure a recipe for “disaster” during a virtual panel discussion on June 1 hosted by the conservative think tank.
Many economists are opposed to price controls as a means of curbing inflation. It would repeat mistakes that led to gas lines in the 1970s, they say.
Former Treasury Secretary Larry Summers, during an interview with Bloomberg, called the price-gouging bill “dangerous nonsense.”
The bill was also met with opposition from the U.S. Chamber of Commerce, which dubbed it the “Bring Back 1970s Gas Lines Act.”
In August 1971, President Richard Nixon ordered a 90-day freeze on prices and wages. Inflation eased for a while, but price increases from the 1973 Arab oil embargo made inflation worse.
According to industry analyst Trilby Lundberg of the Lundberg Survey, which monitors prices at gas stations nationwide, there is “great danger” that something comparable to the 1970s controls may reappear in 2022.
“When President Nixon instituted price controls in 1971, they were only supposed to last 90 days. Instead, they lasted for nearly 10 years,” Lundberg wrote in a recent note to clients.
Nixon’s price-control initiatives on petroleum and natural gas were far less effective. Inflation, which was slightly above 4 percent in 1971, reached double digits.
“When you have binding price controls, you get shortages. And the shortages manifested themselves as gas lines,” David Kreutzer, senior economist at the Institute for Energy Research, said at the Heritage panel.
There were stories of people waiting hours, which wasn’t unusual, he said: “I waited in the line almost three hours one time.”
The shortages lasted until President Ronald Reagan completely repealed price controls in 1981. Within five years, gas prices at the pump dropped by a third.
Lundberg argues that blaming businesses for price gouging is the “first step toward price controls.”
She says if Biden imposes controls, current “eye-popping pump prices would be joined by station outages, closures, and long lines of angry motorists.”
Price controls, according to proponents, have been used in numerous industries throughout U.S. history. There are still price limits in several significant areas, including public utilities, rent, and health care.
As governments grapple with the effects of COVID-19 and climate change, enacting selective price controls to protect consumers from price gouging would be a wise policy, they recommend.
However, economists disagree about whether price controls could solve America’s inflation problem.
In January, the University of Chicago conducted a survey of the country’s leading economists to learn about their perspectives on price regulations.
When asked whether price controls similar to those used in the 1970s might successfully lower U.S. inflation over the next 12 months, 65 percent responded they “disagree” or “strongly disagree.”
“Just stop. Seriously,” Austan Goolsbee, a professor at the University of Chicago and former adviser to President Barack Obama, responded to the question.
The survey also found that only 10 percent of economists believe that a key driver behind today’s higher inflation is big corporations in uncompetitive markets using their market dominance to raise prices to juice their profits.
