Price Decontrol Research Articles

Immediate decontrol of natural gas unlikely

When President Reagan moved so quickly in January to remove all remaining price controls from crude oil, many thought it would not be long until the same action was proposed for the complex controls on natural gas. After months of speculation, however, a decision has been made to put off such action until sometime next year. Decontrol of all gas prices has significant support, but the President probably is bowing to political realities. Sen. James A. McClure (R.Idaho), chairman of the Senate Committee on Energy & Natural Resources, has said since January he does not want to take up gas decontrol until next year, and House minority leader Robert H. Michel (R.-Ill.) has said the House isn't going to consider decontrol before adjournment this year. Rep. John D. Dingell (D.-Mich.), chairman of the House Committee on Energy & Commerce, also opposes consideration of decontrol, adding that the 1978 gradual decontrol law is working well. ...

Fuel switching, gasoline price controls, and the leaded-unleaded gasoline price differential

The Environmental Protection Agency and others have opposed gasoline price decontrol, alleging a wider posted price differential between leaded and unleaded grades would result, inducing more motorists to switch illegally to leaded gasoline fouling catalytic converters and hence increasing air pollution. EPA's model must assume that only the unleaded price ceiling is binding. It is shown that the resulting excess demand is shifted to a close substitute: leaded gasoline. Hence, controls cause more consumption of leaded fuel in new cars (switching) and more pollution. Thus, decontrol would have a palliative effect, contrary to EPA's claim.

Recovery for plastics monomers delayed

Frustration is the 1981 outlook for three major monomers used in plastics— styrene, vinyl chloride, and toluene diisocyanate (TDI). Production of these materials fell steeply in 1980, ranging from 8 to 20%. In 1981, supposedly past the recession, these three will do well to match 1980 production or slightly exceed it. Hence, these monomers start the new business cycle in worse shape than their derivative polymers, which are not in very good condition themselves. For one of these, polyvinyl chloride, a bloody shakeout looms in the next few years. Obviously, something went wrong in some exuberant planning for the monomers in the late 1970's. An extended recession, slow recovery, export reversal, oil price decontrol, and swollen plant capacity have combined to give monomer producers a dreary outlook for the next two years. It wasn't supposed to be this bad in 1981. Upturns in demand appeared late in 1980 and early this year. A clear recovery ...

Energy Conservation: The Debate Begins

Critics of the idea that gas and oil price decontrol will increase conservation and renewable resource investments argue that Reagan's plans are not corroborated by any studies. The debate centers on different perceptions of the role of government and the marketplace. Conservationists feel that Reagan should have abolished all subsidies for conventional and nuclear energy as well as lifting price controls, but they also argue for government intervention. Studies by the Solar Energy Research Institute, the National Audubon Society, the Mellon Institute, the Edison Electric Institute, and others project a different future than the Administration, but conservationists hope to see money shifted from other areas of the budget, such as nuclear power, for their projects. (DCK)

The Distributional Impact of Alternative Gasoline Conservation Policies

This article provides a methodology for evaluating the direct distributional impacts of energy conservation plans. Focus ing on gasoline conservation, we analyze two different types of plans: excise taxes and white market coupon rationing. Using a sample which focuses on the nonbusiness use of individual households and a gasoline demand function estimated on data from these households, we provide simulated burdens for the different conservation plans. We analyze in detail the distribution ofthe burden, partitioning the population by income class as well as by several important demographic characteristics. ? Protecting people from the adverse effects of higher energy prices has been an important concern in the development and evaluation of energy conservation policies. The standby gasoline rationing authority granted to the President is a way of raising gasoline prices while also protecting low income people from at least some ofthe adverse effects of price increases. The govern? ment has also established assistance programs for homeowners who use home heating oil, presumably to protect them from the impact of oil price decontrol. While the concern over adverse distributional effects has been strong, very little

Surfactant raw material outlook for the eighties

AbstractOver the next decade, the surfactant industry should be able to secure an adequate supply of the raw materials necessary to provide its need for surfactant intermediates. Since the U.S. will continue to rely on foreign imports for marginal crude supplies, periodic disruptions in raw material supply are likely to occur. World crude prices are expected to rise more rapidly than the general U.S. inflation rate and surfactant feedstocks are expected to track world crude prices as a whole. Over the next few years, ethylene prices should increase faster than other surfactant feedstocks. This should occur as a result of natural gas price decontrol and improved ethylene profit margins. Otherwise, in the long term, the major driving force for all three synthetic feedstocks should be the price of world crude. Of course, short term perturbations, e.g., plant shutdowns and over‐supply situations, may cause one feedstock or the other to increase at somewhat higher or somewhat lower rates for short periods of time. Natural oils may represent an interesting alternative to crude‐oil‐based alcohols. Longer term, average prices for natural oils should increase at lower rates than world crude oil. However, natural oil prices have historically been much more cyclic than crude prices and “natural” alcohol producers run the risk of being noncompetitive during tight supply/demand periods.

U.S. Energy Price Decontrol: Energy, Trade and Economic Effects

U.S. Energy Price Decontrol: Energy, Trade and Economic Effects

Energy: The next twenty years

This article, which discusses principal findings of the recently published study Energy: The Next Twenty Years, identifies the fundamental realities that define the energy problem, distinguishing real concerns from numerous unreal dangers intruding into current discourse. The discussion emphasizes oil import dependence and the high economic as well as political value in reducing that dependence. The article tries to sort out the complexities that confound simplistic assessments, favorable or unfavorable, of coal, nuclear energy, and solar power. It also addresses the economics of conservation and environmental protection, with special emphasis on regulating air quality. Our problem is believed to be one not of crisis but of a continuous wise management of a large set of problems all prone to create crisis if mismanaged. A number of specific policy recommendations are made including the decontrol of oil and gas prices, reform of public utility prices, retention of the nuclear option, strong support for conservation and solar energy, including temporary subsidization, and much more sharply focused roles for government and industry in the R&D process. These recommendations may help provide a sense of direction essential to U.S. energy policy making.

Reviews

Energy forecasters agree on broad policy directions, but they fail to detail rational plans and end up disagreeing on specific political, social, and institutional issues. Several recent publications illustrate the lack of consensus on the character of the 1973-74 oil crisis except to say that only cheap oil is running out, that conventional oil production may have already peaked, that producing countries will restrict supplies, and that global demand will continue to grow. A comparison of several studies shows disagreement on long-term goals and the policies required to meet those goals. Analysts seem unable to deal with conflicting real world interests, as evident in the debate over price decontrol, that politicians face daily. Analysts tend to ignore the questions of equity and consistency which are basic to decision making. Future studies could deal with things which really matter by starting with future energy supplies and analyzing how to adjust demand rather than trying to find the supplies to meet projected demand. (DCK)

Economic Policies and Trends in Sri Lanka

THE PRESENT United National Party (UNP) government came to power in July 1977 after an overwhelming victory in general elections in which the country's economic problems figured prominently. Soon after assuming office, the new government initiated many basic and far-reaching economic and financial policy changes. The major changes indicated new directions and new strategies, departing considerably from the policies pursued for many years in the past. The new economic and financial policies basically envisaged a considerable enlargement of the free sector of the economy. The economy has subsequently been freed from many of the controls and restrictions that had been built up over the years with a view to allowing the market forces to play a greater role in the allocation of resources.' This view provided the rationale for introducing a substantial measure of trade liberalization, relaxation of foreign exchange controls, considerable decontrol of prices, and the removal of many other restrictions on the operation of private sector and market-oriented activities. The government also decided to limit or do away with the monopoly and dominance of public sector institutions in some spheres of activity in order to permit a greater degree of competition between the public and private sectors. Another significant policy change was the definite commitment towards a substantial degree of foreign (private) capital participation in the country's development efforts, especially for export-oriented industries.

Planning for an Oil Cutoff

A group of academic and industrial energy specialists met recently to discuss options for the United States in the event of an oil cutoff. The present rate of filling the Strategic Petroleum Reserve was seen as symbolic, with little practical value except as a means of buying a little time. The government's gasoline rationing plan was viewed as simply unworkable, as stated by one of the participants. Instead of the defensive plans characterized by reserves and rationing, the participants endorsed several proposals for quickly increasing energy supplies. These proposals include a relaxation of environmental laws, faster decontrol of oil and gas prices, and accelerated building of coal and nuclear electric plants. (SAC)

Impact of Energy on Future Transportation Systems

The cost and availability of petroleum will profoundly affect the future of the U. S. transportation system, as 98% of transportation energy comes from oil. U. S. crude oil production peaked in 1970 and world production is expected to peak in the next 10 yr or 15 yr. Thus, the U. S. will continue to be dependent on imported oil at increasingly higher prices set by the OPEC cartel. This will have a damaging effect on the U. S. economy. Alternative measures to deal with this problem include: decontrol of domestic oil prices; increasing conservation of oil used by transportation; mandatory allocation of petroleum products; and more efficient energy conversion systems. Lighter automobiles with more fuel-efficient engines, and the utilization of alternate energy sources, including synthetic fuels and electric and hybrid vehicles, are among the potential changes in future transportation systems. Language: en

The Role of the Economist in Natural Resources Policy

On April 5 of this year President Jimmy Carter addressed the Nation on energy. After a brief introduction the President said:“Federal government price controls now hold down our own production and encourage waste and increase dependence on foreign oil.”The President then went on to say:“–I have decided that phased decontrol of oil prices will begin on June 1 and continue at a fairly uniform rate over the next 18 months. The immediate effect of this action will be to increase the production of oil and gas in our own country.”

An Oil Insurance Policy That May Lapse

The Strategic Petroleum Reserve, if filled, will consist of at least 750 million barrels of crude oil stored in Gulf Coast salt domes. It could be the only buffer between the United States and an economic disaster in the event a large part of US oil imports were cut off. Congress has appropriated $7 billion for the reserve since early 1975. It is estimated a total cost of the oil needed to fill the reserve at $19 billion. With a full reserve, the immediate response to a severe shortage would be to start moving crude from the salt dome storage facilities into the pipelines and fleets of coastal tankers that regularly deliver oil to most of the nation's refineries. The vital infusion of oil could be maintained for a half year or longer, thus giving the President a better chance to bring about a resumption of the flow of imports by careful diplomacy or other means. There is less than 90 million barrels of oil in storage today and the flow of oil into the reserve has been drying up. Because of US foreign policy commitments and the possible difficulty of filling the reserve with reducing supplies of petroleum productsmore » demanded by consumers, the reserve may go begging. No oil has been purchased for the reserve since late last year. For the reserve to be filled to its planned capacity by the end of 1986, 250,000 barrels of oil a day must begin flowing into it by November, with this rate to be maintained day in and day out for the next 7 years.President Carter has not mentioned the strategic reserve in any of his energy statements since July. The future of the reserve program looks bad. The best chance that the reserve will be filled may lie in the gradual increase in the price of gasoline and other petroleum products resulting from the rising cost of imported oil and the phased decontrol of domestic crude oil prices. (DP)« less

Oil price decontrol to hit chemicals slowly

Oil price decontrol to hit chemicals slowly

Decontrol of natural gas prices hoped for

Decontrol of natural gas prices hoped for

Economic Restraints on U.S. Energy Supply and Demand

Authors' Note - This paper was prepared for the 1974 SPE-AIME Eastern Regional Meeting last fall. While events have overtaken some specific items included in the paper, we believe that our basic arguments remain valid. Consequently, our conclusions remain unaltered. For example, a tariff on crude oil and a tax on natural gas, along with decontrol of old oil and new gas prices, have been proposed by the Administration. Since these proposals deal primarily with the level of energy prices and the prices of individual fuels relative to each other, the framework that we have set forth lends itself to an analysis of the effects of those proposals. We specifically mention in the text that the outcome is not proposals. We specifically mention in the text that the outcome is not intended to be a forecast. Rather, it is intended to illustrate a method of assessment. We have not attempted, therefore, to include additional events, recent or prospective; we feel that an assessment of the effects of specific proposals is beyond the scope of our paper. Introduction Most studies of U.S. energy markets are very narrow in scope. Traditionally, they focus on the demand for a fuel in a particular consuming sector or set of consuming sectors, on the supply of a particular fuel, or on the demand and supply for a particular fuel. Moreover, in studies that do treat supply and demand of energy in a comprehensive manner, the supply of particular fuels and the total demand for fuels typically are regarded as being more or less independent of price. Finally, developments in energy markets tend to be regarded either as being independent of general economic conditions or as being related to economic conditions in some simple mechanistic way. This paper analyzes the U.S. energy and economic situation through 1985 with emphasis on the necessary interrelationships. The relationships considered are those between prices and quantity demanded for various fuels in each fuel-consuming sector, the quantity of various fuels supplied from domestic sources, oil imports, and economic conditions. An ideal approach to the problem would be to build a model incorporating these interrelationships and use it to simulate the effects of alternative fiscal and monetary policies, energy policies, and other world factors on the policies, energy policies, and other world factors on the energy and economic variables of interest. Attempts to do this are being made, but it clear how successful they will be. A viable alternative is to use several more specialized models in a systematic fashion, taking care to insure consistency between variables in the various models. This approach has been used in this study. Use of the Data Resources, Inc., (DRI) Energy Policy Model allowed treatment of the relationships between economic activity, energy prices, and the quantity of energy demanded. Exogenous estimates of domestic oil and gas production were used to estimate the U.S. demand for oil imports. Some consequences of developments in energy markets for general economic conditions are also discussed. Projections Projections While the quantitative estimates reported in this paper must be regarded as indicative and should not be regarded as forecasts, the analysis has yielded several important insights. First, a continuation of the current energy prices, which are much higher than prices have been prices, which are much higher than prices have been historically, would be expected to result in significantly lower growth rates of the quantity of energy demanded during the next several years. A sharp decline from previous experience in the growth rate of the quantity of previous experience in the growth rate of the quantity of electricity demanded contributes importantly to this result in the simulations. JPT P. 803

The Veterans Emergency Housing Program

Veterans Emergency Housing Program-usually alphabetized to VEHPis the one major economic innovation of the Truman Administration. Conceived early in December, I945, with the appointment of Wilson Wyatt as National Housing Expediter, the VEHP was born on December 20, I945, with the issuance of Civilian Production Administration Priorities Regulation 33 which channels building materials into mediumand low-price housing. With business and the Administration engaged in an almost fervent campaign to liquidate wartime production and distribution controls as rapidly as possible the VEHP struggled upstream against the trend throughout 1946, trying to boost the volume of housing construction to record levels, and to ensure that the houses which are built sell or rent at prices which veterans can afford to pay. Data now available indicates that about a million housing units will be started in 1946, if contractors proceed with plans for starting about 75,ooo houses late in November and December in spite of uncertainty with respect to materials costs following price decontrol. Completions during the year are estimated at 700,000. This is a tremendous achievement even though it falls short of the I946 goal by almost two hundred thousand. big question now with respect to the VEHP is one the President did not answer on November 9 when he announced decontrol of almost all prices and wages. With wages and building materials prices free to respond to the pressures of an uncontrolled and highly inflationary market, what happens to the Housing Expediter's I947 program of I.5 million starts on mediumand low-priced houses? What happens to construction costs on the hundreds of thousands of houses started this year which are not yet completed? As of November I5, I946, when this is being written these questions cannot be answered. It is clear that the VEHP will continue. In his decontrol announcement the President said: The removal of price ceilings on building materials will obviously necessitate a change in the approach to some of the problems in the housing program. I am asking the Housing Expediter to report to me promptly in this regard. We must continue an aggressive program of building houses and apartments for veterans.