Bryan Caplan  

Name Your Price: When Will Gas Price Controls Return?

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The Gasoline Market... The Cynical Case for the Gas T...

How expensive will gasoline have to get before the federal government brings back price controls? My guess is $5.50. What's yours?


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COMMENTS (32 to date)
liberty writes:

probably depends on who is in office (congress may want to pass it, but will need help):

McCain: $7
Obama: $6.50 (?)
Hillary: $5.60

Wild guesses. But I would bet, just for fun.

Rue Des Quatre Vents writes:

Any candidate:

$7.00 within their first term.

I'd bet $20 on that.

Brad Hutchings writes:

It depends on the number of reliable Republicans in the Senate. Republicans will filibuster price controls until they get ANWR and Pacific Coast drilling. They will successfully argue that we made this problem by not having enough domestic supply as a ballast against international craziness. They will also successfully argue that price controls just introduce new, different problems that will not subside easily when the price eventually subsides. I think ANWR will cost $8/gallon. That's the breaking point where Dems will ditch the environmentalists, who will have already made a huge gain by curbing demand with the high market price.

Krasnoye Vino writes:

Gas Price Controls? Ahh yes, I can't wait for the gas lines to appear as a result.

Jason Briggeman writes:

shameless self-promotion --> I thought the question of price controls on gasoline had already been established as a resoundingly successful response to Caplan's Challenge.

Vincent Clement writes:

Price controls! Isn't that something that Hugo Chavez promotes in Venezuela? It sounds very un-American.

Krasnoye Vino writes:

First, citing of the Iraq issue poll statistics is flimsy at best, I would scrutinize the internals...were the words 'victory' or 'retreat' used? If not it is a flawed poll.
Secondly, polls that show a majority of anything the masses want is irrelevant, ours is a country that runs on (used to) foresight and solid judgment, not on political and populist maneuvers.

chizzum writes:

At $4.20, the stoners revolt. We're dangerously close.

(We all know the stoners control politics.)

Maniakes writes:

I don't think there will be any price controls on gasoline, no matter how high the price goes. Almost every elected official will have at least one advisor who understands that price controls lead to shortages, and every politician worth his salt will understand that while high gas prices may lose him votes, 70s-style gas lines would lose him the election.

Randy writes:

Sorry, but I just don't see the probability as being very high of ever seeing a price that would bring about price controls. People are already buying more fuel efficient cars, fewer cars, driving less miles, using more public transit, living with a wider range of interior temperatures, cutting down on other products that use energy, etc. I'm waiting for the crash in the oil bubble. I expect that it will kick in when regular hits about $4/gal.

brian writes:

Brad:

How big of an effect could the oil retrieved from ANWR really have on prices in the gigantic world oil market? While price controls are not going to fix the problem, neither will drilling in ANWR.

Jesper Antonsson writes:

Please come again? We Europeans live with gas prices around $8/gallon because of taxes, and we generally have less money than you to begin with. If you Americans can't stomach prices like that without implementing idiotic Soviet style policies, you may not have a very bright future ahead of you. Peak oil is coming for you.

Dr. T writes:

In response to Mr. Antonsson:

The Americans reading this blog will not be demanding gasoline price controls. However, a large proportion of our population has been brainwashed by our media and politicians that high gas and heating oil prices are always due to the greed of OPEC, oil companies, or both. These people believe that price controls will just be keeping down the profits of greedy oil barons. Economists and other rational people have been unable to convince the media, the politicians, and the general public that supply and demand have more affect on oil prices than greedy oil barons.

Because of this continued (and, perhaps, willful) ignorance, I can easily see legislation putting price caps on fuels. It happened not too long ago in Hawaii.

Snark writes:

Worst case: Non-binding price controls in the $6-$7 range, but I'll bet we don't reach $5/gal.

Incidentally, with all the recent betting going on around here, could Arnold and Brian potentially be faced with federal racketeering charges?

Matt writes:

Do you have paypal?

James A. Donald writes:
I don't think there will be any price controls on gasoline, no matter how high the price goes. Almost every elected official will have at least one advisor who understands that price controls lead to shortages, and every politician worth his salt will understand that while high gas prices may lose him votes, 70s-style gas lines would lose him the election.

Politicians are stupid and evil - well not stupid exactly, but very narrowly focused on votes and coalition building. The likely consequences of their policies are completely outside their mental horizons.

Price controls become popular every few decades, so get applied every few decades. The time approaches to do it once again.

Lord writes:

Just as soon as we become net exporters.

Peter Saintonge writes:

Looking at the 70's and contemporary Europe, it seems the rate of change outweighs absolute level. So I guess it depends on how quickly it gets to (say) $7.

I wonder if politicos today are quicker to reach for the "windfall profits tax" than the price controls, at least 'til voters forget about the 70's...

Luke Wright writes:

I don't think that there should ever be a price control on any good or service. I represent Adam Smith and the free marketeers! Putting in a price ceiling would just cause more problems. The problems I am talking about are gas shortages. I would rather pay $7.00 a gallon for gas than wait in a 5 hour long line only to find out that when I get to the pump they are out of petrol. That is what will happen. America should be a free market economy. If I wanted price controls I would build a time machine out of wood and warp back to the soviet union. Are we not America? Didn't our free market economy beat the soviet price controlling communistic economy as badly as we beat them in Red dawn and Rocky 4. My question to you is why are we discussing at what price will the government place a price control on gas in the first place? This is the USA we don't believe in any price control.

Jake Randall writes:

I'm with Luke, the market ought to be free. The government stepping in is very risky, and often does more bad than it does good. However, I do feel the price of gasoline is rising too rapidly, and the government surprisingly can do something about it. The major oil companies are charging the U.S. too much money per oil barrel that we purchase. The best way I've come up with to battle this, is expand. I believe it's something like 90% of the oil used in the entire world, comes from the middle east(Kuwait). The vacant fields of Alaska are full of oil. From what I've read the one thing holding us back from digging there is the protection of a certain species(a sea lion of some sort). These animals would be affected severely by the oil rigs and the pollution. I'm all for the preservation of wild life and national parks, but if this animal is the only thing standing in our way of being our own source of oil(which would benefit our exports to foreign countries as well), than we need to be focusing our efforts on finding a way to mass migrate these creatures to another habitat. It sounds far fetched but this is the 21st century. We have landed a man on the moon. Why isn't there more focus on this in the media? It sounds like the best solution to me.

David writes:

The market ought to be free, but this is a democracy.

I'm going with $6/gallon if Obama wins, and move to cripple the Chinese economy if McCain wins, because he's a maverick.

Jesper writes:

Hmm... This is quite interesting. Previously, I've always thought the reason you Americans have had a freer economy is that your general public better understand the virtues of such a system. Yet statements in this discussion seems to point in another direction. Perhaps then, your often better economical freedom might be a consequence of your federal system?

In Western Europe, the EU has, arguably, led to sounder economic policies and better economical freedom, the perverted common agricultural policies notwithstanding.

Ethnic Austrian writes:

@Dr. T:
European customers and the media are delusional too. They also believe that high oil prices are due to speculation and evil conspiring oil barons.

The simple truth that oil is getting scarce is too painful to accept, since this would ultimately imply lifestyle changes.

What customers are frequently overlooking, is that gas prizes are only a small fraction of the total cost of owning and using a car. They keep buying unnecessarily big, luxurious and prestigious cars and are willing to shell out tens of thousands of Euros for their mobile status symbols. Gas prize increases could be easily compensated by purchasing more sensible cars.

Price controls can only work in oil exporting nations.

What Austria has been doing for quite some time, are tax rebates for commuters. This resulted in more commuting of course.

So my bet would not be on the introduction of gas price controls, but rather on commuter subsidies, tax rebates or coupons of some sort.

It will be interesting to watch whether Americans are really as pro free market, as they claim to be.

Has anybody thought about the option of an inverse OPEC? Oil importing nations could agree on import quotas and tariffs. That could shift some of the profits from oil exporting nations to oil importing nations.

liberty writes:

The dems are pursuing windfall profits taxing the oil companies too. One step away from a price control and the opposite of a gas tax holiday...

Brad Hutchings writes:

@brian: Bryan asked about the politics, not the effect on prices of drilling in ANWR. Imposing price controls is a stupid plan. Drilling in ANWR falls somewhere between brilliant and price controls. <grin>

liberty writes:

Jesper,

A bit of each perhaps (and in Europe too). We used to have a real independent spirit; belief in markets; frontier mentality; pride in responsibility; love for freedom. Not so much anymore. Most of the public doesn't understand econ 101 and also believes themselves to benefit from various controls, and thinks they are morally sound.

The federal system, combined with some remnants of the earlier ideals which spark up every once in a while when they are badly threatened, allow us some vestige of free markets. Europe had, for a long time, opposite ideals to the ones I named above, and no checks and balances-- hence much worse policies. Both are beginning, perhaps, to change.

Dan Weber writes:

By the time we get to $5 a gallon (wholesale), it will make economic sense to manufacture gasoline, at least according to these guys:

http://www.nytimes.com/2008/02/19/science/19carb.html

It might sound drastic, but when people start paying $5.50 for gasoline, and are told "we can bring that down if you let us build nuclear power plants," I'm betting a lot of the regulatory bullshit will evaporate.

Ethnic Austrian writes:

@liberty:

Isn't it mostly rhetoric anyway? Unless you are comparing the USA to France only, it seems difficult to point to grave or systematic differences between the US and Europe both today as well as historically.

Austrians are an EU skeptic bunch. But two thirds of the population agreed to enter the EU in 1994. Free trade, better access to european markets and the wealth this would create was a big part of the argument back then. This was enthusiastically supported by card carying socialists. Before that, we were part of EFTA, which after the cold war made little sense.

Would Americans have agreed to NAFTA in a referendum?

Today, I've learned that the US had actual soviet style gas price controls in the 70s. This in the country that Schwarzenegger claimed to have fled to from "austrian socialism". LOL
He could also freely admit to using steroids, since personal use is not illegal in Austria.

A lot of what libertarians fight for in the US is already in place in Austria. (a system similar to school vouchers, tiny, now totally abolished inheritance tax, no property taxes, deregulated postal system, actual healthy competition in the telco market, prositution, gambling, ...)

There are on the other hand many idiotic special interests restrictions on the market that don't exsist in the US. Zoning for pharmacies, notarys, farm subsidies, idiotic rural development etc. and it is our alleged pro-business party that supports these.

It seems what is left, is mostly rhetoric. Americans are ostensibly pro freedom and free markets and against commies and socialists, because this is their national mythology.
Half of all Austrians on the other hand look forward to their mayday marches to sing their workers ballads, wave their red flags and call each other comrades.

Valestrania writes:

1. Mandadory price controls at the wholesale & retail levels.

2. Strict rationing. Each car owner gets a card entitling him/her to a set number of gallons per month.

3. Black market fuel traders & speculators should face long prison terms without parole.

4. Over a period of a couple of years, phase in a nationalization of the entire energy industry.

ME writes:

All the people complaining about oil shortage if there is a gas price control are probably enviromentalist or mentaly retarded. We as American people have places we can start drilling in, and would have enough oil to last for 1000 years at the high oil demand we have right now; however we cant start drilling there. Only for one reason. The enviromentalist. They think that if we do it will kill off all the wild life arount the drilling site. WRONG! They said the same thing when the Alaskin pipe line was put in about the Caribou population. but after the pipe line was put in the caribou population actualy went up because of the minut change in the temperature around the pipe line. so if you want someone to blame for high gas prices blame the enviromentalists and the big time oil barons who are sitting back collecting record profit. And the European people on here telling the Americans that they have gas prices at 8/gallon BFD. your European were American. We dont care what your gas prices are! I say Gas prices cant get above $7.50 before somthing has to happen.

Paula Vidulich writes:

My gas tank was on empty today so I got gas in Oakland, CA. It was $4.999 per gallon. I think you've underestimated. I hoped that if the price really out of the ballpark Americans would do "something". Today, as I walked around a high school track six times for exercise (I'm in my mid 60's), I noticed I was the only one picking up trash. Actually, I never see people picking up trash. Obama wants us "old folks" to butt out, the world belongs to the youth, who should grab it, the decisions are theirs to make...ratta ratta. Remember his early campaign speeches? My hopeful guess is that it will top out at $10.00 per gallon, $15 to $20 would be even better. There has to be a point where people will..."something". I'd like to hear what the young folk that Obama was motivating in his campaign think should be done about the price of gas. They are the reason he is the Democratic candidate. I'd especially like to hear from those age 17 to 23. Sadly, since the government knows that most Americans just care about their own comfort zone, the government will keep the price going up until Americans are begging them to drill off the California coast, etc. So sad.

Jeff writes:

With an oil loving president in office Oil prices will soar, when they rip up all the wild land we have left and continue to find little profit from the oil they have...which wont show any profit at all for 10 yrs anyway.

Prices will soar, and little progress will be made on hydrogren cars, wind farms, solar power, nuclear, and other important clean energy technology we need.

Obama will lower gas prices with clean energy and stop drilling everywhere. We dont need to drill out way out of this global warming problem. Oil will only continue to hurt the environment and
will contribute to the climate crisis

We have clean technology we can implement on a mass scale today. And Obama is the right man to get this job done

http://www.barackobama.com

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