The Public Interest

The conflicting goals of national energy policy

Robert E. Hall & Robert S. Pindyck

Spring 1977

NATIONAL energy policy faces a deep conflict in objectives, which has been a major reason for the failure to adopt rational measures: Consumers want cheap energy, but producers need high prices to justify expanded production. So far the goal of low prices has dominated. Through a combination of measures, some longstanding and some thrown together quickly during the energy crisis of 1974, the price of energy to consumers in the United States has been held far below the world level. Domestic producers have been prohibited from taking advantage of the higher world price, and in the case of oil, a heavy tax has been imposed on domestic production to finance the subsidization of imports.  These steps have caused demand to increase more rapidly than production, and energy imports have risen to fill the gap. If recent policies are continued, imports will continue to grow. Some painful choices regarding the objectives of energy policy will force themselves upon the United States in the next few years. 

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