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Spring 2018
ISSN 0890-913X
Volume 33, Number 1

Removing the 1970s Crude Oil Price Controls: Lessons for Free-Market Reform

Robert P. Murphy, Texas Tech University
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TheJournalofPrivateEnterprise33(1),2018,6378Removingthe1970sCrudeOilPriceControls:LessonsforFree-MarketReformRobertP.Murphy*FreeMarketInstituteatTexasTechUniversity______________________________________________________AbstractDuringthe1970s,theUSfederalgovernmentenactedanevolvingsetofdetailedpricecontrolsoncrudeoil.Yetbyearly1981,almostallvestigesofthecommand-and-controlregimehadbeenremoved,withareturntoanormalmarketfortheresource.Thispaperexploresthefactorsleadingtosucharapidderegulation,distillinglessonsthatmaybeusefulforotherareasoffree-marketreform.Iconcludethatabsurdunintendedconsequences,academicunity,publicchoiceconsiderations,andluckallplayedarole.______________________________________________________JELCodes:N42,N52,Q48Keywords:oilsector,pricecontrols,Nixonshock,deregulation,energyeconomicsI.IntroductionTheresnothingmorepermanentthanatemporarygovernmentprogramisacommonandcynicalviewamongmarket-friendlyeconomists.LudwigvonMises(1949)andRobertHiggs(1987)botharguedthatinitialgovernmentinterventionsintoasectoroftheeconomywilltendtogrow.Publicchoicescholarscertainlyappreciatethedifficultyofrollingbackmajorpolicychangeswhentheyinvolvemassiveflowsofwealthtoconcentratedbeneficiaries.USgovernmentinterventionintocrudeoilmarketsduringthe1970sseemsaperfectexampleofthispattern.WhatstartedwithRichardNixonsgeneralwage-and-pricecontrolssoonevolvedespeciallyaftertheOPECembargointoanintricatesystemofpriceandallocationcontrolsinthepetroleummarket.Lane(1981)summarizedtheepisode:FromtheirimpositioninJanuary1974to*TheJohnTempletonFoundationfundedthisresearch.RobertBradley,MichaelGiberson,DavidR.Henderson,andananonymousrefereeprovidedhelpfulcommentsand/orresearchsuggestions.GonzaloMaceraprovidedresearchassistance.
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