Don't Let Me Stop You: How Not to Run an Energy Policy

No one likes paying the much higher gas prices we are seeing lately, and it's small consolation that Europeans are still paying more. One thing that is a relief is that the US is avoiding many of the foolish, counterproductive policies used in the last energy price crunch by the Carter administration. The price controls, import/export rules, and "Windfall Profits Tax" enacted then badly distorted the market. The government rationing caused local shortages and long lines at gas stations around the country. The new regulations and taxes eliminated the incentives and the capital to produce more energy. Billions of dollars were squandered on programs like the Synfuels Corporation that never were economically viable.

At least the Bush administration has not repeated these mistakes. Athough the urge of politicians to "do something" by throwing money at a problem remains irrestible, there is progress.

Not so in China. The Wall Street Journal (subscription only link) sees a connection:

WSJ.com - China Does Carternomics: "We don't know if the Chinese have suddenly appointed Jimmy Carter as their energy czar, or whether it just seems that way. The two- and three-hour long gas lines now stretching down city blocks in many provinces in China are certainly an unwelcome reminder of the 1970s when U.S. policies caused a similar energy panic.

So let's think of this as a teaching moment. In China today, many of the same Carter-era policy prescriptions for high energy prices have incited the unprecedented gas lines. The government has imposed price controls on oil and gas in an effort to fight inflation, just as the U.S. did back then, and in the last few weeks it has even resurrected another Carter-era gem, a 'windfall petroleum profits tax' on oil and gas producers. Perhaps Chinese President Hu Jintao will soon deliver a televised speech to the nation wearing a cardigan."