But that was a long time ago, and people forget, especially when they're being stung by today's high gas prices and looking for somebody they can blame. Which is why Sen. Pryor's proposal will appeal to anybody who's too furious about gas prices to think straight. Unfortunately, fury is not the best mood in which to make rational policy.
The debacle that was the Carter administration's energy policy could have been foreseen. To review Economics 101: The function of higher prices is not just to reflect higher costs, but to dampen demand in order to maintain supply. In her testimony before the committee, Chairman Majoras pointed out that the sharp rise in gas prices after Katrina resulted in more gas getting to the market.
It's called the law of supply and demand, and we interfere with its operations at our risk. To cite Henry Hazlitt's little primer, "Economics in One Lesson," the first effect of price controls is to increase demand, since people can now afford to buy more of the commodity, and the second is to reduce supply, since the producer can't afford to sell it at a loss, or in this case will seek a better price for his oil in what is now a global marketplace.
Remarkably predictable, the workings of the free market. Class adjourned.
But the demagoguery goes on. According to a press release from his office, Sen. Pryor is going to defend us from "the greed and profiteering in the oil marketplace."
Despite his disappointment that the FTC's official report didn't support his conspiracy theory, the senator plans "to address these issues as we move forward." Or maybe backward to the 1970s.
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