Oil, Gas, and Government: The U.S. Experience, 2 vols.

• Author: Glasner, David

About fifteen years ago, when memory of the energy crises of the 1970s remained fresh in everyone's mind and the inevitability of future energy crises was the unchallenged premise of public policy, I decided to write a book about the causes of and cures for chronic energy crises (Politics, Prices, and Petroleum: The Political Economy of Energy. San Francisco: Pacific Institute for Public Policy Research, 1985). My diagnosis was straightforward: The energy crises sprang from the controls on energy prices that were the sole legacy of the comprehensive wage and price controls that Richard Nixon, in a display of towering cynicism, inflicted on the American economy in August 1971. Outflanking his Democratic opposition, he embraced the very "anti-inflation" policy of stopping inflation by outlawing price increases that the Democrats had proposed in the credulous belief that Nixon would never forsake his free-market principles, let alone renege on his solemn pledge never to impose wage and price controls.

Nixon got all he really wanted from his betrayal -- a landslide electoral victory over a fractured opposition and a hapless opponent. The costs of that fateful decision were left for others to bear when the legal suppression of the price mechanism prevented a smooth adjustment to the very small supply disruptions associated with the so-called Arab oil embargo of 1973 to 1974 and, about five years later, with the fall of the Shah of Iran. The adjustments would have occurred automatically in a free market but, in its absence, horrific shortages of gasoline that traumatized the entire country inevitably resulted. As Nixon himself later admitted in his memoirs, his U-turn was prompted entirely by political, not economic, motives. If a group of oil executives had ever hatched a conspiracy for their own benefit with the total disregard for the public interest displayed by Nixon and his co-conspirators, among whom it is depressing to recall were such eminent economists as Arthur Burns and Herbert Stein, they would have been lucky to escape with their heads. Although Nixon did leave office in richly deserved disgrace, neither he nor his collaborators were ever called to account for their crime of 1971.

Despite the actions of the Nixon administration and its immediate successors, the republic somehow survived the misbegotten system of price controls on oil and refined products until 1981, when Ronald Reagan finally terminated them amid a chorus of critics...