Commentary

Gasoline Lines for California?

This article was published in the Washington Times, Sept. 7, 2003.

California Lt. Gov. Cruz Bustamante is campaigning for his boss’s job with the logically impossible theme of “No on Recall, Yes on Bustamante.” Until very recently, there was no visible difference between the policy plans of Gov. Gray Davis and Mr. Bustamante — i.e., to tax and spend with abandon. But now there is one big difference. And that difference reveals that Mr. Bustamante is, remarkably, even more incompetent than Mr. Davis when it comes to dealing with economic problems.

It turns out that Mr. Bustamante wants the state constitution amended to allow public utility regulators to set the price of gasoline. He would have to get the U.S. Constitution amended, too, because of the pesky “interstate commerce” clause that prevents one state from declaring economic warfare on the others. But neither law nor economics gets much attention in Sacramento these days.

Critics of Mr. Bustamante’s proposal were quick to point out that President Nixon tried price controls in the early 1970s, and the most memorable result was endless waiting lines for gasoline. Unfortunately, that is like asking Californians to recall how badly price controls worked under Diocletian during the Roman Empire. After all, a fourth of Californians are foreign born and half are under the age of 33. Most Californians have no idea what life was like under price controls from August 1971 through April 1974.

Anything scarce and valuable has to be rationed by price, or by waiting lines, or by political officials deciding who gets what. When politicians refuse to let the price system do the rationing, then bureaucrats get to do it. It must be great fun to have the power to decide who gets to be first in line. It is much less fun for those with less political influence, who invariably get shoved to the back of queue.

Following some noisy protests by truckers and farmers, Mr. Nixon’s officials quickly instructed the refineries to divert more oil into making diesel fuel and less to gasoline. An affluent friend who owned a gentleman’s farm in Connecticut and drove a diesel Mercedes couldn’t imagine why I was so bothered waiting for gas.

The reduced supply of gasoline then had to be allocated among gas stations in some way that sounded fair. The amount of gasoline a dealer was entitled to was therefore determined by how much the station had sold in 1972. So the gas went to where people had been traveling when fuel was abundant and cheap. Fearing an inability to refuel, however, people naturally stayed close to home.

The Pocono Mountains, a New Jersey vacation spot, began advertising free fill-ups to reluctant vacationers. Gas stations on the relatively deserted highway between Los Angeles and San Francisco began offering gifts with a gas purchase, just to get rid of the stuff. Meanwhile, long waiting lines became the norm in every city and suburb.

The price system could have fixed this in one day — and did when controls ended. The price would have fallen where gas was abundant and risen where it was scarce, and merchants would then have a big incentive to move gas to where it was needed. Under price controls, however, to make such sensible changes in prices was a crime. The only gas station open on Long Island one Sunday was shut down and fined for “gouging.” After that, Long Islanders had the comfort of knowing that gas would have been just as cheap on Sunday as on Monday, except that there was none being sold on Sunday (or on many afternoons, for that matter).

I had nearly a two-hour train commute at the time, from New Jersey to Manhattan, but first I had to drive to the station. Getting gasoline added an additional hour and a half to the commute. I would grab a thermos of coffee and a book, and get in a line that stretched for blocks. The gas would sometimes be gone by the time you got to the head of the line.

People who had to drive to work got nervous and frequently refilled tanks that were more than half full. That led to another regulation requiring a minimum purchase of 10 gallons — problematic for me, since my Chevy Vega had a 9.8-gallon tank. Instead of mandating a minimum gas purchase, The New Jersey Turnpike Authority set a maximum of one dollar. Turnpike travelers got in line several times until their tanks were comfortably full.

Fistfights at the gas lines became common. Young women reportedly received after-hours fuel service in exchange for some services of their own. Those with more money than time hired those with more time than money to wait in line for them (a relatively efficient solution, actually). But this was only the surface of deeper problems.

To allocate price-controlled oil “fairly” among refiners, the Energy Department required oil companies that drilled in the United States to share their price-controlled U.S. oil with those that relied on costly imported oil. The more oil the latter group imported at $13 a barrel, the larger their entitlement to somebody else’s $5 bargain. That made the “blended” cost of imported oil seem artificially cheap, thus subsidizing oil imports at the expense of domestic oil producers. Thanks to gasoline price controls and crude oil rationing, Arab oil producers had us over the proverbial barrel.

Since rediscovering the 1983 Media Institute book “Energy Coverage-Media Panic” at Amazon.com, I found that on June 2, 1972, I had warned in National Review of “our increasing reliance on the volatile Arab nations” and predicted that “the nation’s power crisis has already begun and is certain to grow worse.” On Aug. 10, 1973, I warned that “Saudi Arabia… is probably going to halt expansion of oil and to propose to other Arab oil nations they do the same.”

Nobody listened, and the press tried to blame oil companies. On that loony theory, oil prices rise when oil companies become greedy and fall when they become charitable.

No government had the wisdom or the right to dictate to businessmen what their products are worth. And no government has the wisdom or right to dictate to workers what their work was worth.

The fact that Cruz Bustamante is sufficiently arrogant to embrace such Nixonian foolishness means he is not merely a clone of Gov. Gray Davis, but that he is all that and less. California voters have no choice but to assume that Mr. Bustamante’s ambition of somehow pushing state gasoline prices below the level set by global and regional supply and demand was a serious proposal. If seriousness is to be distinguished from frivolity, then Mr. Bustamante has quickly proven himself an entirely unserious candidate for any position requiring knowledge and judgment.

Alan Reynolds is a senior fellow with the Cato Institute and a nationally syndicated columnist.