The Corner

Regulatory Policy

Pelosi and Price Controls

Attendants at a gas station in Portland, Ore., November 1973. (David Falconer/Project DOCUMERICA/National Archives)

Well, I suppose this was inevitable.

Bloomberg’s Javier Blas tweets:

US House Speaker Nancy Pelosi says Democrats will next week present a bill on gasoline price gouging. The bill will enable the president to issue emergency declaration making it illegal to increase the price of gasoline. “Price gouging needs to be stopped.”

Economically, this is utter stupidity. It would just be something else that discourages the increased investment in new oil and gas production that consumers need.

This proposal probably cannot (for once) be explained by the climate wars (if it can, it will eventually accelerate the greenflationary ratchet still further), but by political calculations that make sense in a way that its economic logic does not. Firstly, it allows Democrats to show that they are trying “do something” to halt the rise in gas prices ahead of the midterms. The problems it may cause over the longer term, well, those are for another day. Secondly, if Republicans oppose the measure (as they should), it enables them to be portrayed as being puppets of “big oil” and enemies of the consumer. Thirdly, it plays into the narrative being peddled by Warren and (sometimes) Biden that the current inflationary surge is somehow the product of corporate greed. And (finally for now) it will “encourage” the oil companies to keep in the good books of senior Democrats.

Not bad, really.

And for everyone else?

Well, here’s a little reminder from Hugh Rockoff:

Because controls prevent the price system from rationing the available supply, some other mechanism must take its place. A queue, once a familiar sight in the controlled economies of Eastern Europe, is one possibility. When the United States set maximum prices for gasoline in 1973 and 1979, dealers sold gas on a first-come-first-served basis, and drivers had to wait in long lines to buy gasoline, receiving in the process a taste of life in the Soviet Union. The true price of gasoline, which included both the cash paid and the time spent waiting in line, was often higher than it would have been if the price had not been controlled. In 1979, for example, the United States fixed the price of gasoline at about $1.00 per gallon. If the market price had been $1.20, a driver who bought ten gallons would apparently have saved $.20 per gallon, or $2.00. But if the driver had to wait in line for thirty minutes to buy gasoline, and if her time was worth $8.00 per hour, the real cost to her was $10.00 for the gas and $4.00 for the time, an overall cost of $1.40 per gallon. Some gasoline, of course, was held for friends, longtime customers, the politically well connected, and those who were willing to pay a little cash on the side.

That’s the price Pelosi would have consumers pay.

GALLERY: That ’70s Energy Crisis

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