High Gas Prices: The Road Ahead

Should we try to lower costs, or learn to live with them?

When fuel prices soared in the 1970s, both Democrats and Republicans embraced government intervention in the energy markets. But many of the measures they tried--including shortage-inducing price controls and the taxpayer-funded synfuel boondoggle--turned into disasters. The result: Lawmakers adopted a more or less hands-off approach toward Big Oil for the next 30 years.

Suddenly, though, intervention in energy is respectable again. The surge in gas prices has energized two types of people. The major group, including many prominent lawmakers, is looking for ways to drag the price of gas back down. A smaller group sees today's high prices as an opportunity to rebuild the economy for a future of permanently expensive energy. What they have in common is a shared belief that today's mostly free market in energy isn't working.

The pro-intervention camp has a diverse membership, ranging from national security advocates who favor U.S. energy independence, to liberals who want to keep energy prices low for the poor, to venture capitalists seeking government research funding, to the antitrust litigation bar. Trouble is, different kinds of interventions would work at cross purposes. Measures to keep a lid on fuel prices--if successful--would please voters. But lower prices would encourage more consumption, thus stalling the campaigns to achieve energy independence and reduce emissions of greenhouse gases. Here are some proposals on the table.

By Peter Coy

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