Handling Oil Supply Reductions: 1970s vs. 2000s

Some of you may be old enough to recall the oil crisis of the 1970s, while others may need to ask their parents or read about it in a book or Wikipedia. Comparing the 1970s with the 2000s provides an excellent example of the different ways to decide who gets to buy what, in this case, gasoline.

Parameter 1970s 2000s
Prices Remained Low Rose 70-100%
Time To Obtain Product Hours – Days Rose 70-100%
Government Intervention Price Ceilings Supply Additions

My dad told me a story about how he managed the lines for gasoline. He had a friend that worked at a gasoline station. His friend would let him park his car over night at the pump. Then, before the station would open, he would walk down to the station and wait for it to open and buy his gas. Isn’t that a great way to decide who gets to buy what?

In the 2000s, instead of government price ceilings, the prices rose as supply shrunk. Those who were willing to pay for gas did, and everyone else stopped driving, took the bus, rode a bike or carpooled. Then, when you really did need gas, like to drive your laboring wife to the hospital, you did not have to wait in a 3-day line to get gas. An interesting side note is that oil volume during the 1970’s crisis was the same as it was the year after and the year before. The reason for the crisis was hoarding. People were topping off their cars every day. They were storing it in their back yards just in case they needed it. Had prices risen as the free market wanted them to, hoarding would have been too expensive, as it was too expensive to hoard 6 months ago.

Economics are not only easy to predict because they are simple, its amazing how many people are ignorant of them. Ignoring the facts is far too common in our society. What are you doing to quit ignoring the facts?

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