Oil prices

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Oil prices

The following is from Thomas Sowell. Compassion Versus Guilt. pp. 113 - 115

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Oil prices

The true mark of a deep thinker is that, no matter how wrong the facts prove him to be, he is utterly self-confident with his next assertion. "Often wrong but never in doubt" should be his motto.

The "oil crisis" of the 1970s brought the deep thinkers out of the woodwork everywhere. To them it proved—as everything always does—the need for the government to control our lives, as the only way to avoid total disaster. When a few people like Milton Friedman bucked the tide and said that government controls were the cause of the crisis, and that decontrol was the cure, they were howled down.

When Ronald Reagan said that decontrol and the normal operation of the marketplace would bring down oil prices and relieve the shortage, to deep thinkers it only showed how "simplistic" he was. They turned their deadliest weapon on him: sneer power.

When gasoline prices recently began dropping below one dollar a gallon, it was a big surprise to the deep thinkers and big news in the media. No one seemed to remember that this was the very opposite of widespread predictions that gasoline prices would rise to over two dollars a gallon. However, the current issue of Policy Review magazine has published a large collection of quotes from those who made such predictions. It should be required reading.

Senators Ted Kennedy and Howard Metzenbaum and Congressman John Dingell all predicted that gasoline prices would go over two dollars a gallon. So did Nobel Prize-winning economist Kenneth Arrow. So did Lester Brown of World Watch Institute, writing in the prestigious Bulletin of the Atomic Scientists and the equally prestigious Foreign Affairs quarterly. Oil expert Dan Lundberg had similarly pessimistic predictions. Senator Dale Bumpers predicted gasoline prices of three dollars a gallon. Sheik Yamani of OPEC predicted even higher prices.

Predictions of declining oil production, rising prices, national "emergency" and "world depression" were commonplace. Among those contributing to such hysteria were Business Week magazine, New York Times economic writer Leonard Silk, as well as various officials of the Carter Administration. President Carter himself said that oil prices "are going to rise in the future no matter who is President, no matter which party occupies the administration in Washington, no matter what we do."

As usual, all this hysteria was not without some political purpose. The bottom line was more government power. Ted Kennedy advocated "gasoline rationing without delay" and urged his fellow Democrats to oppose decontrol. His fellow Massachusetts Democrats Congressmen Markey and Mavroules joined the chants. The former said, "Decontrol as a cure will prove to be worse than the disease of oil addiction." The latter predicted that heating oil prices would rise so high that the average Massachusetts household would be paying more for fuel than their total taxes. (Heating costs have in fact gone down.)

Mere government controls were not enough for Glyn Jones, who said in the New York Times: "America's oil system must be nationalized as are those of Libya, Nigeria, Mexico, and Venezuela." Except for Libya, these are countries the deep thinkers are now asking us to bail out with the American taxpayers' money, because oil prices have fallen.

Needless to say, the fall in oil prices now proves to deep thinkers once again that the government must step in to avert disaster. The Democrats have no monopoly on this fallacy. Vice-President George Bush has made hysterical statements worthy of Ted Kennedy, including his incredible suggestion that we encourage OPEC to keep oil prices from falling.

No matter how many times the marketplace works and government controls fail, deep thinkers are going to prefer government controls. Controlling the economy sounds so logical, so humane, so right. And how it sounds is what matters to politicians—and to too many intellectuals.

Wherever the government sets prices below the market level, shortages are virtually guaranteed. It may take the form of gasoline lines, as it did in the 1970s here, food lines as in Eastern Europe, waiting lists for automobiles in India, or interminable searches for apartments in cities with rent control—whether in America, Europe or Asia. Government-imposed prices created shortages under the Emperor Diocletian in the days of the Roman Empire. Prices imposed to make food "affordable" to the masses created widespread hunger instead when the French did it in the 1790s, when the Russians did it after the Bolshevik Revolution, and in numerous African countries in our own time.

At some point we have to start paying attention to results rather than rhetoric.

— June 14, 1986

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29 May 2024