Watching Government: Price controls in retrospect

Oct. 3, 2005
When gasoline prices jumped in Hurricane Katrina’s wake, several federal and state lawmakers complained that consumers were being victimized.

When gasoline prices jumped in Hurricane Katrina’s wake, several federal and state lawmakers complained that consumers were being victimized. Retail gasoline and diesel fuel prices that climbed 12¢/gal in an afternoon were clear evidence of gouging, they declared, and if it didn’t stop soon, government would have to step in.

David J. Bardin has been there and done that. And the former chief administrator of energy price controls during the Carter administration would like lawmakers to think long and hard before trying it again.

Now retired from, but still of counsel at Arent Fox Kinter Plotkin & Kahn PLLC, the Washington law firm he joined in 1980, he recalled that oil price controls already were in place when Carter was inaugurated. They originally were part of a broader set of measures President Nixon instigated to fight inflation, most of which the Ford administration had removed by January 1977.

Some headway also had been made on removing oil price controls, Bardin told me. Domestic crude oil prices, which Nixon had frozen, were allowed to rise at a rate equal to inflation. But retail price controls remained on some oil products, along with an allocation system that attempted to equalize crude oil prices, effectively subsidizing imports.

Early opportunity

“The day before President Carter took office, the Ford administration sent a message to Congress decontrolling gasoline within a certain period. So the Carter administration had to decide immediately whether to yank it back or let Congress do its will,” Bardin said.

Carter favored decontrol but felt it was too soon to exercise the option. “If he had,” said Bardin, “we would have had a gasoline price spike, with all the anger and frustration, but no gasoline lines 2 years later.”

Other energy issues jumped to the foreground. A cold snap between Carter’s election and inauguration had focused attention on interstate natural gas prices, which had been controlled since the 1950s. Bardin considers the modification of those controls the single biggest energy accomplishment of the Carter period.

Gradual decontrol

Aviation fuel and propane price controls were lifted, and the Carter administration initiated a program to eliminate crude oil and other product price controls gradually. It was about one-third complete when Ronald Reagan took office.

Bardin remains skeptical about oil price controls’ effectiveness. “We’ve been there in various ways, trying to use the national government to deal with gasoline prices in a way different from other commodities, supposedly because it’s a necessity,” he said.

“But there is some elasticity,” he continued. “People do not give up their cars, but they will change their habits by planning their trips and car-pooling. It seems to me there’s a lot of hydrocarbon technology and conservation potential. The trick is to encourage it without exposing taxpayers, customers, or competitors to excessive giveaways.”