Carter and Reagan on energy

Energy policy represented one of President Ronald Reagan’s best accomplishments and worst legacies.

Ronald Reagan

Under his administration, an unworkable price control and gasoline allocation system was abolished, and oil prices were left to the working of the free market.  The free market worked the way it was supposed to work.  Prices went up, demand went down, producers looked for new sources of oil, and the price went down and stayed down (in inflation-adjusted terms) for the next 20 or 25 years.

President Jimmy Carter inherited gasoline price controls from the Nixon administration, and began a long-range phaseout.  During the oil price shock of 1979, however, he clamped down on prices and instead imposed a gasoline allocation system based on previous use.  This didn’t work.  Restrictions on availability of gasoline changed the patterns of use.  Too much gasoline was allocated to tourist destinations, for example, and too little elsewhere.  There actually were gasoline riots.

Reagan’s insight was that a market system of supply and demand works better than central planning would.  Unfortunately he carried that insight to a counterproductive extreme – that once you unleash the free market to increase production, energy policy can safely be ignored.

The Carter administration was the first to make a serious effort for energy conservation and energy independence (sometimes acting under authority of laws enacted during the Ford and Nixon administrations).  Fuel efficiency standards for automobiles were increased.  Incentives were provided for insulating buildings.  An ambitious research program on solar and other alternative energy sources was launched.  Large industrial companies such as Kodak and Xerox voluntarily launched their own energy conservation programs parallel to what the government was doing.

We benefit from the accomplishments of the Carter era to this day.  We would benefit even more if governmental policy had continued on the same trajectory.  But Ronald Reagan planted the meme that conservation is unmanly, alternative energy is a fad and the supply of oil will take care of itself.  That’s a meme we’re going to have to get rid of.

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3 Responses to “Carter and Reagan on energy”

  1. Ted Lechman Says:

    This is a great topic – and relevant as hell. The one statement I would dispute is that during Reagan, price control were lifted and after an initial spike, more exploration and refining lead to long term stable low oil prices. As is now known, the reduction in oil prices was due to explicit collusion between the US and the Arab oil producers – Saudi Arabia in particular. This was a purely foreign policy play on both sides in response to the Soviet invasion of Afghanistan in Dec 29, 1979. The plan and subsequent result was to artificially lower global oil prices (by Saudi Arabia supplying oil ABOVE demand) and thus reduce Soviet Foreign currency income from oil, thereby starving the Soviet Union of strategic imports – such as food and technology. Though this worked, a side agreement was that the US would NOT invest in alternative energy. The subsequent result was to increase our dependence on foreign oil – a major cause of our trade imbalance and deficit.


  2. laurent Says:

    In the 80’s, Saudi Arabia, not Reagan, was responsible for the oil plunge.

    In September 1985, Saudi Arabia decided to increase production, creating a “huge surplus that angered many of their colleagues in OPEC”.

    Between 1985 and 1990, Saudi Arabia increased oil production by 6 million bbl/d at a time when the world was using 60 million bbl/d.

    Saudi Arabia used this money to finance the jihadist ideology worldwilde.

    Unfortunately, nowadays, Saudi Arabia wants an oil price between $70 and $90 a barrel.

    And now unrest hits the Persian Gulf, so brent crude could hit $200.


  3. Hate to Say it, But President Carter’s Energy Policies Were Spot On! Our Revered, President Reagan, Was The One Who Compromised Our Foreign Policies For a Quick Cheap Oil Fix! – Rifkin Associates Says:

    […] Rather, executing one of the largest historical transfers of wealth out of our nation to those who s…  In that context give this speech a listen decades later: […]


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