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From Crisis to Abundance: Oil Strikes Back
| Article
# : |
10046 |
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Section : |
CURRENT ISSUES
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| Issue
Date : |
4 / 1986 |
1,322 Words |
| Author
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Richard H. Fink
Richard H. Fink is an associate professor of economics at
George Mason University and president of Citizens for a Sound
Economy. |
Six years ago if someone had predicted oil prices would fall below $15 per barrel in 1986, they likely would have been laughed out of town. Starting with the 1973 embargo, some conservationists, no-growth advocates, and certain politicians contended that the world was running out of oil. Regardless of OPEC, these seers contended, energy supplies should be rationed, speed limits should be lowered, synthetic or alternative fuels needed to be developed, and prices had to be regulated. The energy crisis had become "the moral equivalent of war."
As pessimistic as these predictions were, they were not the most gloomy scenarios offered about world oil. Some analysts even broached the possibility of $100 per barrel of oil. Although prices stabilized somewhat in the early part of this decade, the price per barrel was still well over $30. Furthermore, energy "experts" predicted prices would resume their upward march. Billions were spent on developing synthetic fuels, and the federal government created the framework of a gas rationing system that would have cost taxpayers $2 billion a year to administer.
An underlying theme in these arguments was that the free market could not be relied upon to allocate resources. Market critics contended that "greedy" corporations and OPEC nations made normal considerations inapplicable. It was the responsibility of government to step in and ensure that the world ran out of energy in an equitable manner.
Rules without age: supply and demand
Needless to say, the "era of limits" is no more. What happened to change
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