Price controls: making a bad situation worse.

ITEM: Joan Claybrook, president of the activist group Public Citizen, issued a statement on September 1 reading in part: "In the wake of skyrocketing gasoline and oil prices after Hurricane Katrina--both as a result of speculation on Wall Street and product shortages--President Bush and Congress should enact temporary, adjustable price controls to ensure that gasoline and home heating oil prices charged to consumers will be directly tied to costs, not speculation or price-gouging. The government also should enact an excess profits tax retroactive to January 2005 to reduce oil company incentives to gouge consumers.... Effective today, Hawaii became the first state to enact a price control measure to ensure that residents aren't gouged at the pump; federal price controls could be implemented in a similar fashion."

ITEM: On August 31, CNN's Soledad 0 'Brien faced off against Energy Secretary Samuel Bodman on American Morning, demanding to know: "What can you, and what can the President do, to help people, because the prices are clearly spiraling out Of control? What about a national price cap? There are some people who say gas is going to cost $3 a gallon, the average will be $3 a gallon by the end of the week--by next week. What about a national price cap?"

CORRECTION: The loaded and leading network questioning clearly suggests that national controls are needed to lower gasoline prices to the "proper" level. That rationale hardly differs from the neo-Marxist rantings of Ralph Nader's Public Citizen and other so-called consumer activist groups demanding that the government tax oil companies' supposed windfall profits and that they set the price of fuel to prevent "gouging."

The fact that Hawaii has been foolhardy enough to try to bring back the bad old days of gas lines and shortages is seen by left-wingers as a precedent to be used as a lever for nationwide political manipulating of prices by bureaucrats and politicians.

The history of the inevitable failures of government price controls is simply ignored. Even a dim-witted cat has enough sense not to sit on a hot stove a second time, yet liberals love price controls and higher taxes no matter how many times they burn us. It is as though the lines, shortages, "odd/even" days for purchasing gasoline, and other counterproductive foolishness of a previous "energy crisis" never occurred. Those negative repercussions occurred when previous price controls also played out as critics predicted. As noted by Robert Bradley, Jr. and Richard Fulmer in Energy: The Master Resource, "In hindsight, the confusing swirl of regulations that the government spewed out during the 1970s oil crisis gave consumers the worst of two worlds--higher prices and shortages."

It is hard to believe that control proponents really think that imposing "windfall profits taxes" (WPT), now under consideration, would boost supplies. This supposed solution has also been tried before, between 1980 and 1986. "The WPT reduced domestic oil production between 3 and 6 percent, and increased oil imports from between 8 and 16 percent," noted a 1990 report from the Congressional Research Service. "This made the U.S. more dependent upon imported oil."

The gas lines and shortages that sprang up during the Carter years (which disappeared when Ronald Reagan repealed price controls) wasted gas as well as time. An estimated 150,000 barrels of oil per day were used by Americans idling their cars while waiting in lines, economist Walter Williams has recalled. When President Reagan got rid of those controls after two weeks in office (the price of oil then being $40 a barrel), Ralph Nader called it "the greatest crime in history," and predicted prices would rise to $600 a barrel. (Naderites change little: price-control pusher Joan Claybrook heads the group Public Citizen cited above, which was founded by Nader.)

Not only do controls cause other economic damage, they don't freeze prices in any real sense. "Price controls didn't stop the cost of gasoline from rising," note John R. Lott, Jr. and Sonya D. Jones in the Houston Chronicle. "They just changed how we paid for them. Instead of prices rising until the amount people wanted equaled the amount available, chronic shortages of gasoline had Americans waiting in lines for hours. Yet, the supposedly permanent shortages disappeared instantly as soon as price controls were removed." Production increased and prices fell.

Meanwhile, despite the controls now in effect in Hawaii, prices there still have been rising. Of course, the controls were placed on the wholesale prices, rather than at the retail level, so advocates now want tighter and "better" controls. The calls for increased controls ignore the fact that in Hawaii, energy companies have to deal not only with the greater logistics costs than in most of the rest of the country but also with excessive regulations and taxation. Gasoline taxes in Maui County, for example, are 60 cents a gallon, the highest in the state, reports the Wall Street Journal. The Journal also quotes a prominent local jobber who says: "Subtract the associated taxes and you will find Hawaii is not out of line [with the rest of the country] at all."

It would be astounding if hurricane-related events had not produced higher prices. After all, some 60 percent of U.S. oil imports travel through Gulf Coast ports. At the peak of the driving season, recounted Jack Rafuse on the Tech Central Station website, "Katrina shut down platforms producing one-sixth of U.S. domestic oil production; and LOOP [Louisiana Offshore Oil Port], which throughputs 30% of U.S. oil imports. She damaged handling facilities and refineries that process almost one-half of our domestic and foreign oil; and the tank farms and pipelines that move most of that oil and gasoline to the U.S. Northeast and Midwest."

While government does not produce anything, it can surely cause things to happen. Such as shortages. Government regulators and pressure groups have seen to it that not a single new refinery has been built in this country since 1976. Exploration, pipeline construction, and drilling have had "environmental" roadblocks tossed in their paths--in Alaska, offshore, and elsewhere. "Progressives" continue to oppose the building of nuclear plants and liquefied natural gas facilities.

Other activists demand making already-xisting CAFE (corporate average fuel economy) standards for vehicles more stringent, despite the fact that CAFE requirements have caused manufacturers to reduce vehicle weight, thereby contributing to 2,000 additional deaths on the highways each year, according to a 2001 National Research Council study.

Other government policies subsidize the price of gasoline--in Iraq. As Congressman Ron Paul (R-Texas) comments: "Iraqis can buy gas for as little as five cents per gallon, courtesy of the American taxpayers! We're talking about imported refined gas, because Iraqi refineries are not operating. Iraqi officials, using American tax dollars, buy this fuel from the Saudis or other OPEC nations at market rates. This subsidy to Iraq cost us nearly $3 billion in 2004 alone."

The problem, once again, is too much government. The solution assuredly is not to give government even more power to control prices and energy supplies.