Introduction to Microeconomics – 4 of 14 – Price Controls in the Oil Industry – Murray N Rothbard

INTRODUCTION TO MICROECONOMICS
Presented by Murray N. Rothbard in 1986 at New York Polytechnic University. Recorded by Hans-Hermann Hoppe.

4. Intro to Micro: Price Controls in the Oil Industry

The disappearance of oil has been forecast every decade. Prices were overlooked. When the price is high it is more profitable to look for oil. Total reserves on the ground are higher than they were in 1890. Treating demand as a fixed quantity, the oil industry tried to control production and prices. Gas rationing was implemented. 55 MPH limit was legislated without economic or safety benefit. Safety belts increased fatalities of pedestrians. Natural gas experienced increasing shortages when it became artificially cheap. An insane price structure led to the shut down of older wells.

Part 4 of 14. Presented in 1986 at New York Polytechnic University.

This lecture as a Podcast: http://enemyofthestate.podomatic.com/

Sourced from: https://mises.org/library/introduction-microeconomics

Source: Introduction to Microeconomics – 4 of 14 – Price Controls in the Oil Industry – Murray N Rothbard – YouTube

http://www.readrothbard.com/introduction-to-microeconomics-4-of-14-price-controls-in-the-oil-industry-murray-n-rothbard

TRANSCRIPT

00:00
ever since about 1880 there have been
00:01
predictions by so-called experts usually
00:03
technology technologists oil will
00:06
disappear in ten years in other words in
00:07
1890 big shots in the oil industry
00:09
technologists said oil will disappear in
00:11
ten years and every ten years since then
00:15
they’ve been saying the same damn thing
00:16
they said the latest big thing was very
00:19
popular in 1970 during the Carter
00:21
Administration the so-called Club of
00:23
Rome which is a very high-powered group
00:25
of technologists and Italy and MIT well
00:32
using high-speed computers and I came
00:33
inclusion oil with disappear by 1980 or
00:35
that he for I don’t really year was they
00:40
of course all have egg on their faces at
00:41
this point quietly but one bank of the
00:44
woodwork the the basic reason why they
00:48
made these for Casa they didn’t they
00:49
didn’t understand anything about prices
00:50
and left prices out of the out of the
00:52
system in other words face to God
00:54
basically it’s a very simple way of
00:56
doing it but basically what they did all
00:58
these guys been doing if you say you
01:00
have a hundred million barrels let’s say
01:01
of oil in the ground you may as reserves
01:07
and the consumption rate of ten million
01:10
dollars a year then in ten years we
01:14
won’t run out of oil
01:15
that’s the West specially what they did
01:16
they didn’t need computers for that
01:18
either then even a slide rule okay so in
01:22
ten years of forecast but my god is only
01:23
a hundred million dollars I’m on the
01:25
ground is ten million pounds a year
01:26
being you there for ten years we offer
01:28
cut off throat and the problem with us
01:30
is one of these reserves they’re not
01:32
only a small fraction of the real
01:34
reserve these are only the reserves
01:35
which have been mapped and surveyed and
01:38
especially there it’s enormous amount of
01:40
oil down there which hasn’t been mapped
01:41
yet and to is the consumption rate as
01:44
depends on and also the reserves
01:46
depending on the price system in other
01:47
words prices are always tossed out of
01:49
things by there’s almost no engineers or
01:51
our technologies and they’re saying
01:52
about prices and so they like gets
01:54
tossed out okay and what happens is you
01:58
all should know by this time is that
02:00
this is oil or natural gas or whatever
02:02
it is or lumber or whatever it is as a
02:04
supply decreases the price goes up and
02:08
as the price goes up two things happen
02:11
one the consumers start tightening their
02:13
because of course it’s more costly they
02:15
start conserving quote-unquote that was
02:17
they use less of it as we’ve done we did
02:19
with water
02:20
last year stuff like that they used lots
02:23
of it has been done for zomo gasoline
02:26
Mikey
02:27
during the late seventies and then the
02:30
price is higher there’s more of an
02:31
instead of a go I look for more and also
02:33
look at alternative energy sources in
02:35
the word since the prices are higher
02:36
it’s more profitable go up go out and
02:38
find oil and drill it Matt but no you
02:41
know all the rest of it that’s been
02:42
wrong that’s just the final of course a
02:44
lot of money have to go out and look at
02:45
the drilling yeah
02:47
employed geologists going on scout
02:48
around and stuff like that and sound
02:51
economic to do it at this level let’s
02:53
say this price but it does become an
02:54
army to do it up here the result of all
02:56
this is wonder cut consumption to that
02:59
increase supply later on and the price
03:02
falls and also the number the supplied
03:03
go up so reserves even though we’ve been
03:07
using a lot of oil since 1890 there the
03:10
total reserves on the ground now high
03:11
only we’re on 1890 because an expansive
03:15
thing it’s not fixed it on whatever this
03:16
was 100 million vows it keeps growing as
03:18
you as there’s more so more incentive to
03:20
go out and look for sources so that’s
03:23
the basic problem eat with the
03:25
technologist of forecast the end and
03:26
resources then understand about prices
03:30
the the energy crisis really begins
03:32
around eight eighteen thirty or forty
03:35
when whale was run out I don’t know if I
03:36
could I cover this last time know the
03:39
whales used to be the big energy source
03:41
for lamps whale oil and whales began to
03:45
die ad the reason why they died out was
03:47
quite simple over we can call whale
03:49
communism in other words you only just
03:52
go through with a fish go throw a fish
03:54
in general whales the communism of
03:58
whales in other words you could kill any
04:00
whale you get if you kill it if you find
04:02
a way island kill again you own it you
04:03
can’t own the whole school or whatever
04:05
the whatever the technological unit is
04:07
for way over so you can’t say ok
04:08
I own this little group here if you all
04:11
know if you own the whole group
04:13
that’s your economic incentive every
04:16
time you kill away you’re trying to
04:17
replace it in other words getting grow
04:19
more whales so you have a higher capital
04:21
resources your assets go grow but if
04:24
nobody owns the whales in general all
04:26
the school
04:26
salmon or Rams would be in the incentive
04:29
is to kill the whale before the Le guy
04:30
shows it there’s no one sent us a dream
04:33
or way out for somebody else to come
04:34
along and kill it you have no property
04:36
rights in the whales basically what this
04:38
problem is the whole problem Natural
04:41
Resources will cover it again later on
04:43
we’ve got the natural resources the plea
04:44
basically it’s agriculture used to be in
04:49
the same position of oceans are now land
04:50
use there’s no private ownership and
04:52
land you get you own whatever you shoot
04:54
or whatever you gather so the so-called
04:57
hunting and gathering society the old
05:00
days long time ago so people ate you
05:05
know they hunted the year or be forever
05:08
it and they killed a beaver over there
05:09
and they own that things like Jim they
05:11
couldn’t own the whole herd so there was
05:13
language beaver at communism run from
05:15
Arthur alright the year communism on the
05:17
same way with gathering the clip they
05:18
couldn’t own any land they just own
05:20
whatever seeds or nuts or whatever the
05:21
berries that they actually picked
05:23
obviously this means a very low
05:25
productive society can’t can’t sustain
05:26
very many people by gathering nuts and
05:29
hunting on upon the summer looked on the
05:32
run so it happened this land got scarce
05:36
er a population grew with every
05:38
beginning the develop private property
05:39
and land call agriculture an enormous
05:42
step forward which meant that people
05:44
could take the land transforming not
05:46
just pick berries or her to pick nuts or
05:48
gather nuts or what I think I actually
05:49
transform the land and and so stuff and
05:52
wreaths and all that sort of thing
05:53
without worrying about other guy other
05:54
people eating this you know coming in
05:56
and grabbing it because they own the
05:57
they own this land and they hold there
05:59
for the fruits of it so with private
06:01
property comes agriculture in other
06:03
words of Agriculture there’s a
06:06
consequence
06:06
private property rights and this meant
06:10
an enormous development of standard of
06:12
living and production everything else
06:13
then you take the land and transform it
06:15
you don’t have to be stuck with you know
06:17
the berries that you pick and stuff like
06:19
that you actually grow thing isn’t
06:20
pretty
06:21
produced them well we’re now on the
06:23
ocean we’re now still in a situation of
06:26
hunting and gathering we can’t we can’t
06:27
we get on the fish that we catch all we
06:29
can’t only actual school of a herd
06:31
whatever you want to call it it’s
06:32
technologically different for every
06:34
every kind of fishing courts it’s
06:35
difficult to generalize but basically
06:37
you can that’s what we can say that
06:40
increased the product
06:40
the oceans what we need and there’s
06:42
private property in parts of the ocean
06:43
regardless of how this works whether
06:45
it’s a school of a salmon or that I
06:47
happen to be and we’re beginning to get
06:50
that because the ocean is the next great
06:51
frontier of resources beginning to get
06:55
private copies come the long struggle of
06:57
all the sea treaty the UN was I think
07:02
properly rejected by United States
07:03
because they didn’t allow for any
07:05
private property in parts of the parts
07:08
of the ocean especially UN world UN
07:11
government commission we supposed to own
07:13
a respect a little bit of disaster any
07:15
rate the result of this is beginning to
07:19
be private property in parts of the
07:20
ocean now
07:20
it was of course offshore oil-drilling
07:23
you own your platform of a stuffy Israel
07:26
rest of its offshore oil lots of that
07:29
now is manganese nodules under they open
07:32
the bottom of the ocean people are
07:33
getting in mind that but they can only
07:34
do that you see if they’ve there they
07:37
arrest of the assurance that the
07:38
government will protect them and if
07:39
people come in and grabbing the
07:40
manganese nodules after they start
07:42
mining it obviously SS equipment so
07:44
forth the beginning to have that this
07:45
will be more and more time you guys on
07:46
to the next great way to the future in
07:49
addition to space there’s also the
07:50
ending of the oceans and the Japanese
07:53
now have always strip beds
07:55
systematically not owned by private
07:56
enterprise I owned by the municipalities
07:59
offshore so this is coming in more and
08:03
more you need it more and more because
08:04
you have courts of the ocean now which
08:05
are lots of things to happen to it like
08:07
haulers and drill coming in and stuff
08:10
like now you can’t have two or three
08:11
things going at once the row I’m gonna
08:13
run into each other you have that some
08:15
way of allocating the space and then
08:18
private properties is the easiest way to
08:20
do it so anyway once we get that we’ll
08:23
have aquaculture or aquaculture and the
08:26
productivity increase will be enormous
08:28
Kappa will believe it fish for example
08:32
other than the fish situation in order
08:34
to increase the prize up the
08:35
productivity of fish one simple thing a
08:38
lots of things could be know one simple
08:39
thing could make an enormous difference
08:41
facially unfortunately haven’t read the
08:43
Ten Commandment thing understand about
08:44
kind of fish tend to be cannibals eating
08:47
even their own cousins brothers and
08:48
sister so if you separate if you
08:53
segregate fish by
08:54
sighs in other words small fish in this
08:56
area medium-size fishing and large fish
08:59
they’re just doing that with
09:00
tremendously increase apart if attea
09:01
fish then you see the fish Alyssa’s guck
09:04
no algae or whatever like a powder
09:06
whatever they eat it so now you can say
09:09
hugging offense to all parts of the
09:10
ocean isn’t that funny Konami can’t put
09:12
barbed wire down there well now we can
09:14
do it electronically very easily oh it’s
09:16
funny barriers separating fish by size
09:19
that in itself a tremendously increase
09:20
the fish population there’s no incentive
09:22
to do that if you some other guy to come
09:24
along and grab them yeah
09:27
do they know right ah and they have this
09:53
every day by side right right look
09:56
that’s even simpler live electronic it
09:58
could be done that way too
09:59
sure yeah great that’s gonna as I say
10:02
that’s the wave of the future be more
10:04
and more of us going on a friend of mine
10:08
our acquaintance of mine does that with
10:10
turtles he took the turtles in bad shape
10:12
I mean they’re lovable turtles were
10:14
there the environmentalists
10:16
environmental exactly the only people
10:17
killed kill animals actually most
10:19
mammals are killed by other animals I
10:21
don’t know if haven’t read the Ten
10:22
Commandments either the animals don’t
10:24
respect the rights of quote rights on
10:26
court of other animals the turtles are
10:27
bad shape the turtle starts off deposit
10:31
on on a beach somewhere on the West
10:33
Indies and a little baby turtle and one
10:36
of the savers I’ll have to call and a
10:37
low speed from the back of the beach to
10:40
the up to the to the ocean what’s the
10:42
reach of the ocean safe then it can grow
10:44
and develop
10:46
unfortunately a lot of predators between
10:48
they between the beach in the ocean
10:50
little baby turtles birds and other
10:51
animals whatever eat the turtle so the
10:54
turtle population is race there’s an
10:56
endangered species not because of man
10:57
because of the other animals so kind of
11:01
mind of thought he’s gonna he’s gonna
11:02
grow turtle breed them and also increase
11:04
their population so he did that he but
11:06
he did it it’s actually save
11:08
turtles in other words he’s segregating
11:09
from the birds and whatever ways of
11:11
guarding the turtle the turtle is then
11:13
multiplying a population he then killed
11:14
some turtles and made turtle soup out of
11:16
it and in explore in the United States
11:18
for the but the average turtle
11:19
population was much higher and even
11:20
doing it than before
11:22
so the environmentalists of course say
11:25
this is terrible thing is destroying the
11:27
turtle population not understanding any
11:29
of this though not wanting to understand
11:30
it if they’d prohibit it they got the
11:31
United States government being very
11:33
powerful lobby environmentalists got
11:35
them to prohibit importation of the
11:37
christ’ turtles and what didn’t eat the
11:39
United State and of course the enter
11:40
favors major market there’s one bank
11:43
robbing the turtles and how it’s getting
11:43
extinct again hey so this is another
11:46
example of government intervention
11:49
claiming the saver turtle is actually
11:51
helping to destroy them any rate the and
11:58
a lot of lots of cases like this
12:01
saving population in order to breed them
12:03
because you want your your property a
12:04
profit is involved and trying to
12:06
maintain them hurt turtles or seals
12:08
whatever happen to be and then keep them
12:09
keep them active keep them can’t kill
12:12
them or of course they won’t you want to
12:13
have them represent any rate so Michael
12:17
cultures gonna be the next next frontier
12:19
private property various ways and parts
12:21
of the ocean it hasn’t arrived yet and
12:22
in 1830 the whales were getting
12:25
decimated and so what happened was this
12:28
was the first energy crisis the first
12:29
modern energy crisis where we gonna have
12:31
any lamps have to go back to the cave
12:32
the whale oil lamps with a major lamp
12:36
well as well fortunately there’s no
12:38
international Energy Commission to solve
12:40
the energy problem in eighteen forties
12:42
thirties it simply happened was the
12:45
price of the supply as the supply of
12:46
whale has declined the price of whale
12:48
oil went up doubled tripled
12:50
etc and the peoples have Jesus getting
12:52
very expensive let’s look around for
12:53
other another energy resource another
12:55
way of having lamps now worth the
12:57
instead that was there because the price
12:59
was so higher go around look for all
13:01
this stuff so there was for many
13:03
centuries as Blanc is called petroleum
13:05
which was a big waste product was not
13:06
considered a resource or consider of
13:08
pain in the neck because there nothing
13:10
to do with it useless and just wasted
13:12
destroyed there’s no trees rule other
13:14
than the first off and so they began to
13:17
discover technologically that petroleum
13:19
could be used very well for
13:21
kerosene we were fine in the kerosene
13:24
you throw lamps they started using oil
13:26
we are petroleum on the surface of lakes
13:27
and stuff like that
13:28
and pretty soon of course that got too
13:30
expensive they use up and they started
13:32
drilling on the rest of the history 1959
13:34
of the first oil rule in the world in
13:37
western Pennsylvania and they discover
13:39
they didn’t don’t have to rely on the
13:40
surface petroleum there’s lots of it
13:42
underneath and that starts the whole
13:44
petroleum industry and then it forth
13:46
very quickly they find that patrolling
13:49
is better anyway
13:50
cheaper than whale oil and then Kristin
13:52
started using kerosene so the energy the
13:55
first energy crisis was saw not by
13:56
government planning up by people
13:58
worrying about it you know writing books
14:00
about it but by simply pipes going up
14:02
and other people being then getting
14:03
instead of the final common alternative
14:05
energy resource which doesn’t turn out
14:06
to be petroleum remember had no use for
14:09
that at all for centuries okay so the
14:15
more and more petroleum was discovered
14:17
and natural gas later from then on okay
14:22
this is custom new discovery first it
14:24
was thought the United States at Western
14:26
Pennsylvania’s the only patron of fine
14:27
oil that’s it so God is the Creed was
14:30
only in western Pennsylvania Standard
14:32
Oil of New Jersey which was had a quote
14:35
monopoly unquote I’m refining out in
14:38
that period that’s believed in their
14:40
heart and soul that only western
14:42
Pennsylvania will have oil so when they
14:43
discovered oil in Texas and the first
14:44
discoveries came in Santa what’s that
14:46
asked flash in the pan and then other
14:49
younger companies rushed in like Gulf
14:51
and Texaco which originally quite small
14:53
but hey no we think this is important
14:54
we’re not stuck you don’t care about
14:55
western Pennsylvania and it turned out
14:57
to be right and this is beginning of the
14:59
end of the Standard Oil monopoly on oil
15:01
refining so this contains some more or
15:05
less had a free market in this and oil
15:07
till about the early 1930s when during
15:11
the Depression oil prices was a big new
15:12
increase in big new discoveries in Texas
15:14
Oklahoma and the price of oil went down
15:16
magnificently about something like three
15:18
cents a barrel great and the oil company
15:22
then put pressure on the on the
15:24
governors of Texas and Oklahoma if you
15:26
have to stop this we have to do
15:27
something the cart iliza system in other
15:29
words once again getting to the cartel
15:31
part going to later on
15:35
here’s the supply of oil is going
15:37
increase means the price of oil cheaper
15:40
we have to help out the oil industry by
15:43
having government someway restrict
15:45
supply and raise the price and of course
15:48
increasing total revenues you made the
15:50
mill and elastic demand curve for the
15:52
industry and so they prevailed oil
15:54
industry did prevail prevail upon the
15:56
governor of Oklahoma in the governor of
15:58
Texas governor of Oklahoma with a
15:59
colorful character named alfalfa Bill
16:01
Murray and and the sort of people they
16:05
haven’t Oklahoma a Falcone bill and he
16:10
decreed an immediate moratorium on all
16:13
rolling of oil making it illegal and
16:16
they mobilized a National Guard I mean
16:18
what sent troops in the oil fields to
16:19
shoot anybody was rolling oil even their
16:22
own oil I’m talking about other people’s
16:23
oil I was also I should be a movie man
16:26
out of this could be very colorful you
16:27
have the dead of night yeah but oil
16:28
fires in the oil fields knowing the guy
16:30
the National Guard coming and shooting
16:31
people any rate so this is a moratorium
16:36
on all oil production of course the
16:38
price supply goes way down the price
16:40
goes up
16:41
lettuce of course couldn’t you couldn’t
16:43
have a permanent situation where a
16:45
national are shooting oil men so severe
16:48
as they worked out the permanent
16:50
solution of this to have a stable
16:53
continuing permanent cartel of oil and
16:56
what’s called oil proration laws and
16:59
this was a system my way which was then
17:02
reinforced first of all every state had
17:04
it mostly Texas and Oklahoma which is a
17:07
major producing states and current
17:09
California a few others and then the
17:11
federal government in 1935 half a
17:12
hot-oil Act which decrease will ratify
17:15
these oil or production agreement or
17:20
I’ll current color dreamers and also
17:23
outlaw they entered the shipment
17:24
interstate of so-called hot oil in other
17:26
words oil which is not which was beyond
17:29
the prism limited quota production
17:30
quotas which was more than than minimum
17:32
maximum quotas and then making that a
17:34
federal crime so the result of all
17:36
allowances like then we force federal
17:39
and state governments of fourteen oil
17:40
cartel which lasted from about 1933 to
17:42
about nineteen actually until the 70s
17:45
1970s
17:47
the way it worked to me the most
17:52
annoying part of it and that’s where
17:54
personal assistant itself was monstrous
17:55
but the most annoying part of the
17:56
philosophical arguments forgiven by the
17:59
oil industry and Lee and the guys
18:00
running it he cannot make quote
18:03
arguments unquote the course didn’t say
18:06
we want to kartalija oil in the street
18:08
wouldn’t fly in the American public you
18:10
want to restrict production whether
18:12
actually what happened was every month
18:15
the state Regulatory Commission in Texas
18:17
for some reason if the Texas Railroad
18:18
Commission which presumably runs the
18:22
Texas regulates Texas railroads and also
18:23
oil it got shoved in there some reason
18:27
and usually was run for many years by a
18:29
retired general and the Texas Railroad
18:32
Commission is about three or three
18:33
people or five people
18:34
every month like January the first they
18:36
would issue a quota for every oil well
18:39
for the next month for the month of
18:40
January in other words a maximum
18:41
production quota they say but maybe
18:47
quota for the whole state of Texas
18:50
maximum cool expand and I would say 100
18:54
million barrel I have no idea what the
18:55
number is let’s say a hundred million
18:56
barrels idea max anything if you produce
18:58
more than hundred million pounds you get
19:00
shot right or whatever the the the legal
19:03
fine is we go penalty each oil well then
19:05
get the share of a quota in other words
19:07
you have here’s an oil well which gets
19:09
one tenth of one percent of the tolls
19:11
the Texas oil it’s quoted whatever this
19:14
is would be a million like saying one
19:18
hundred thousand barrels for the month
19:20
that produces more than that the owner
19:23
gets shot in other words that they it’s
19:25
a very rigid maximum production quota
19:28
pushing the supply curve to the left I’m
19:30
trying to make and raising the price of
19:31
oil who toil this of course means the
19:33
price of all the other world went up
19:35
well products went up because not
19:37
because the course was passed through it
19:38
all insist on later on but simply
19:40
doesn’t supply is cut so this means the
19:42
supply of gasoline is cut supply of
19:44
kerosene or whatever all these prices go
19:47
up to the consumer is screwed and the
19:49
end and then all at the for the benefit
19:52
of the the oil industry as a whole in
19:54
Texas or Oklahoma or whatever and also
19:57
against any individual competitor like a
19:58
break through this thing I think he can
20:00
do it more
20:00
more efficient job of it everybody’s
20:02
stuck with a quotas as whatever the is
20:05
determined about a state Railroad
20:06
Commission and they’re the same and
20:09
forth reinforcing it and in the fourth
20:13
interstate commerce by the federal
20:14
federal oil correlation Commission and
20:16
they call themself and the the rationale
20:21
was the the Texas Railroad Commission
20:23
will put out leaflets and also the oil
20:25
industry they say something like this
20:27
the oil industry the American Petroleum
20:29
Institute which is a major trade
20:30
association we’re in favor of the free
20:32
market we love the free market
20:34
government appearance however in this
20:36
particular case in order to equate
20:38
supply and demand get this now you
20:41
should know enough to realize a fallacy
20:42
that’s right all right in order to make
20:44
we have to equate supplying them and in
20:46
order to do it the Texas Railroad
20:47
Commission has to issue a production we
20:49
have to estimate what the man will be
20:50
next month what consumer demand will be
20:53
for purchase of oil and then we will set
20:56
the official quota so it’s equal I
20:58
supply in American our wisdom we know we
21:00
can see what the consumers want to buy
21:01
for the whole month and then we will
21:03
regulate it and this equates supply in
21:06
the man cccp saying people have a nerves
21:10
and say they’re in favor of the free
21:11
market and what that because what
21:13
they’re saying here is that gee in order
21:15
to that they can the man is sort of a
21:17
fixed quantity which of course we know
21:18
is nonsense that the man depends on
21:20
price 100 million barrels that the price
21:24
is cut maybe it might be hundred fifty
21:25
million bow you can’t estimate how much
21:27
the consumers would life you don’t know
21:29
what the prices so the the the
21:31
consumption varies in accordance with
21:33
Christ number one of the first fallacy
21:34
and second fallacies you need some of
21:35
them Railroad Commission to figure out
21:38
what the supplies of equate supply meant
21:39
we need all you need is a preflight
21:41
price system it’s a price system moving
21:43
up and down which equates supplying a
21:45
man without any government officials
21:46
claiming that’s the make plant framing
21:48
and bring them into equality so that’s
21:51
the second big fallacy that the market
21:54
equal that’s the point a manner
21:55
automatically equated to each other by
21:58
free movement of prices as we all know
22:00
by this time the only the Railroad
22:02
Commission doesn’t they can’t equate
22:03
anything they’re simply assuming the
22:05
prices supply of the man at such and
22:07
such and it’s a plyo therefore be such
22:10
and such what they want there was
22:11
there’s strict pricks apply and raise
22:12
prices that’s therefore strict they
22:14
didn’t say that
22:15
this is all because I don’t think the
22:17
public would have liked going for it you
22:19
can’t tell the public and when I cut
22:21
that throat as your objective at the
22:23
film it’s all for the good of the cover
22:24
of a country and public in my lap so at
22:27
any rate this this system for sisters
22:29
I’d say for about 40 years
22:31
and the result was a permanent
22:34
restriction on supply and a premier lies
22:36
in prices and also over drilling but if
22:39
it meant if you can get a drill in there
22:41
if you had this kind of situation every
22:44
instead of what’s the man to drill a lot
22:46
of a lot of oil wells and get in on a
22:50
quota if you can you have a lot of
22:52
excessive number of oil wells and each
22:55
one being used only like five percent of
22:56
capacity a temper tonic apparently had a
22:58
lot of fun economic use of resources
22:59
just in that sense too many oil wells
23:02
Michou our well being used instead of
23:03
being used to the capacity to use this
23:05
like three days a month or whatever
23:06
depending on you know what the quota is
23:08
how much they want to jack the price up
23:11
so that was a situation that was
23:13
certainly a disgrace especially in an
23:15
industry you’ve claimed their favorite
23:16
free competition of freedom of free
23:18
markets by about the late 1950s after
23:23
about 25 years ago this they found out
23:25
as always happens with cartels or the
23:27
hitch hitches we can’t shut the world
23:30
out in other words you take a cartel
23:33
price here’s the world world prices tend
23:36
to be about the same for the same
23:38
product oil copper you know they tend to
23:39
be about the same to the lab because you
23:41
can make a profit that copper let’s say
23:43
course a lot more in France in a dozen
23:46
united states the incentives to buy
23:49
copper a knife they can sell it on
23:50
France they buy tending to equalize
23:52
prices unless they’re you know
23:53
government restricted or something but
23:55
as basic tendencies sort of a uniform
23:57
price in each product well he have a
24:00
situation from 1933 on the price of oil
24:03
crude oil now it’s taste and therefore
24:05
of petroleum and therefore gasoline all
24:07
this stuff is being being raised way
24:11
above the world market price so instead
24:14
of being just a bad equal or relatively
24:16
roughly equal the price of oil is now
24:18
jacked up artificially by the cartel
24:20
arrangement by this government fourth
24:22
cartel
24:23
well in that and the people by oil like
24:26
oil refineries
24:27
until it easy whatever consumers and get
24:31
that over here whoa uh-oh commit well
24:35
I’ll start time with Jesus you know the
24:36
hell would the mess they go off to
24:37
expected we’ll start buying foreign oil
24:38
domestic oil had a built-in advantage
24:40
first of all transportation costs of
24:43
Cheaper it is cheaper to ship oil from
24:47
Texas and New Jersey let’s say their
24:49
finery isn’t the shipper from the Saudi
24:50
Arabia in Jersey
24:52
second of all American crude oil have
24:54
it’s the better quality than most
24:57
foreign crude oil less sand that it
24:58
whatever it is in other words the
24:59
quality is such the refineries have
25:02
better able to use it so the tendency
25:03
would have been to use domestic oil
25:05
because of this artificial Kartal is a
25:07
ssin they started on being a big boom
25:10
importing foreign oil so this begins
25:13
that so-called foreign oil crisis in
25:15
other words that my for about 20-25
25:17
years of this as more and more oil as
25:19
important because there’s our official
25:21
price by the oil industry starts bela
25:22
yanking especially the crude oil people
25:24
of course there’s no monolithic oil
25:26
industry understand there’s there’s the
25:28
crude oil people in texas only produce
25:29
crude refinery the big refineries which
25:32
often produce both i mean fine and good
25:35
in screwed and others which only refine
25:37
so it’s a very complex industry there
25:38
was a lot of middle of the middle a
25:40
middleman etcetera so those who
25:43
transport stuff at any rate did make it
25:45
very to try and simplify it basically
25:48
what happened that as oil refiners start
25:49
importing off over from foreign
25:51
countries because we who toil is cheaper
25:53
so naturally for the by the late 1950
25:56
what’s the response of us the response
25:58
rational responses with point view the
26:00
public welfare would i woulda been
26:01
scrapped the whole thing scrap all our
26:03
proration wasn’t allow the domestic oil
26:05
price to be cheap the falls of a foreign
26:07
oil price and then we would have stopped
26:09
losing business of foreign oil producers
26:11
of course they didn’t do that because
26:15
the step the the answer of court tell us
26:17
everywhere keep out the foreign oil
26:19
goddammit numbers they don’t blame
26:20
themselves for making oil too expensive
26:22
they say foreigners are evil foreign oil
26:25
bad domestic oil good a night when jimmy
26:27
carter’s went on the air for the famous
26:29
energy speech 1978 or 79 he’s almost
26:33
said that he held up oil or something a
26:35
symbol full over whether they said
26:36
almost said things like foreign oil bad
26:38
domestic oil is good as if there’s
26:40
something about the quality of
26:41
oil here’s those foreigner Oh God pain
26:45
anyway so next step what to keep out
26:47
foreign oil as a one in response to that
26:51
it was separately low market segregate
26:54
it so to justify the rationalize the
26:56
cartel my with the keeper cartel prices
26:58
in order to keep the competition out say
27:01
foreign oil is evil for some reason and
27:03
keep it out one way of doing is by
27:05
tariffs we you slap a extra attack so
27:08
that’s the import tax oil which they’re
27:10
talking about doing now by the way right
27:11
now whoever sitting here
27:13
those sob even Washington I’m with you
27:15
know well getting cheaper we have to do
27:16
some we have to put a big oil import tax
27:18
on a raise the price of the consumers
27:20
won’t benefit they don’t put up those
27:21
terms that’s basically it Frehley might
27:23
benefit by cheaper oil and at any rate
27:26
the but but that’s wouldn’t been enough
27:30
they figure out far off threat
27:31
quote-unquote is too great therefore
27:33
have an oil import quota and the words
27:35
this is me do let’s put a maximum amount
27:38
principle maximum an amount of oil can
27:41
be important you just freeze it and just
27:44
like you have domestic oil production
27:45
quota you now have a foreign oil port
27:47
quarter which is what they did in 1958
27:50
Texas oil producers Lobby Texas course a
27:52
very powerful state politically and all
27:54
apps etc the federal government pass the
27:57
oil import agreement which froze the in
28:03
other words if it’s here you have oil
28:06
here’s here’s the mystic oil the
28:10
supplies shifting left at foreign oil
28:12
then comes in and this for the shift of
28:14
far no out on the left in other words
28:16
it’s it’s it’s truffle down the supply
28:19
of foreign oil plus the mess take home
28:20
and save a cartel for a while now forth
28:27
the foreign oil producers got very upset
28:29
about this obviously what happens to the
28:30
foreign oil producers Saudi Arabia
28:33
Venezuela however they happen to be is
28:36
here they had a situation here’s the the
28:39
there’s a price quantity he was a demand
28:43
for foreign oil was going up mostly and
28:46
I faced a man because American consumers
28:49
and refiners are shifting to foreign oil
28:51
and all of a sudden bingo
28:55
the the man goes down again even more
28:58
because because of US law no the United
29:01
States says no you can’t import more
29:03
than X amount so all of a sudden they
29:04
find their demand curve falling on a
29:06
price falling foreign oil and of course
29:10
the profits going down losses etcetera
29:12
etcetera so in other words what the
29:14
United States government did they
29:16
shafted two groups of people for the
29:17
benefit of the Texas oil cartel ESCs the
29:21
American consumers of course found that
29:23
prices going up a supply cut and foreign
29:26
oil producers orbit is an Arab countries
29:29
and Venezuela and whatever and Indonesia
29:31
who had oil suddenly found their prices
29:34
fell demand curve fell because of the US
29:37
government action as a result a year
29:42
later 1959 the oil-producing countries
29:46
in desperation as a defensive measure
29:49
formed the famous OPEC Organization of
29:52
Petroleum Exporting Countries as an
29:56
attempt to form a cartel to compete to
29:58
do battle against the American cartel
30:01
this of course has been forgotten by
30:03
professional anti OPEC faders because
30:05
they who claim up until very recently
30:08
OPEC the own powerful cartel the truth
30:10
set the tone price of oil holding
30:12
American consumers at ransom and putting
30:16
a gun at their throats over it so on
30:17
actually low peck begins as a purely
30:18
defensive operation in Renton and horror
30:20
at the American import quota which was
30:22
levied upon them Organization of
30:25
Petroleum Exporting Countries also OPEC
30:31
well a long time couldn’t do a damn
30:32
thing nowhere they form the cartel but
30:35
they could not prevail against basic
30:39
market forces plus the American courts
30:42
Mayan cartel so to speak and OPEC was
30:45
had no power whatsoever couldn’t raise
30:47
the price of oil for many years it’s not
30:49
as if as soon as they were form they’ve
30:50
been then had everybody by the throat it
30:52
couldn´t do a damn thing
30:54
so from 1959 Oh from 1973 the price of
30:58
war of anything fell rather than went up
31:01
and in real terms in other words
31:04
correcting for inflation you always have
31:06
to realize that most prices are always
31:07
going up as an inflation correcting from
31:09
placing the price of oil fell very
31:11
sharply from 1958 straight through the
31:15
1977 days I can send me three it was
31:20
approximately it’s probably about two
31:25
dollars a barrel maybe even less than
31:26
that I lost time and a lot of that was
31:29
due to the tax the Arab countries levied
31:33
on the oil and on the oil firms they’re
31:34
actually you know producing the oil so
31:36
it would have been even the cost the
31:37
actual cost of oil is something like 30
31:39
cents of Marathon thing like that at the
31:42
point of production in Saudi Arabia and
31:44
all you know all the other Gulf
31:45
countries what happened by the early
31:49
seventies in the era of government began
31:50
to nationalize the oil and of course
31:54
didn’t kick out the Western oil company
31:56
but it was simply a levee attacks in
31:57
other words instead of owning the oil
31:59
the oil companies could then use it but
32:02
only by paying a heavy tax to the Arab
32:05
governments which raised the price of
32:07
about two dollars a barrel from like you
32:08
know 30 cents a barrel it’s a big raisin
32:10
compared to what it is now of course
32:12
peanuts so nothing really ham a peck had
32:17
no economic power and it was not able to
32:18
raise the price of crude oil in the
32:20
market until the famous crisis of it and
32:23
nighttime 1973-74 to which we will we
32:28
now turn the crisis is very heavily or
32:33
later Nixon is famous price control
32:34
which I where he talked about Nixon
32:36
froze prices from August 1971 until the
32:42
spring in 1974 and around and so the
32:54
prices were more or less there was a
32:55
heavy price control one thing or another
32:56
I’m gonna bring up suddenly four came
32:58
along I think I guess the 73 was the big
33:01
oil crisis in the Middle East I guess
33:03
the real life is real war and I’m worth
33:06
it suddenly free right something to wait
33:08
some hero 73 yeah I mean three so
33:11
something so the supply is beginning to
33:13
be cut and and then it was an Arab oil
33:16
embargo and so you had then a supply
33:20
being sharply cut of oil coming in from
33:22
the Middle East
33:23
than the major the major oil-producing
33:26
region and this hits now ordinarily what
33:30
of what happens is all the Arab oil
33:32
embargo simply a rise in price and the
33:33
word supply cuts or a price rises these
33:36
might be more like the end of it
33:37
unfortunately this cane just about at
33:39
the time of the winter suddenly 374 we
33:42
still have price controls okay so but
33:45
then heaven was a sudden scarcity of oil
33:48
due to the Arab embargo the war in the
33:51
era of Margo was reflected not so much
33:53
an rise in prices prices were prevented
33:55
from rising but a sudden shortage
33:57
developing and the shortage could not be
33:59
cured by prices going up because the
34:01
Nixons price control set up and so there
34:07
was the first quite a first big
34:08
so-called oil shortage of gasoline
34:11
shorter 73-74 we actually spring him
34:15
from these four I guess and and it was
34:19
reflected in young no heating oil will
34:21
disappeared low on gasoline everyone
34:25
runs out gasoline is everyone so on and
34:28
to meet that instead of allowing the
34:29
price of gasoline or oil to go up
34:34
where’s max I when Nixon and removed
34:36
price control of the spring of 74 he
34:38
kept them on oil and gas a special bonus
34:42
special icing on the cake because it was
34:44
a shortage right occipital nonsense of
34:46
your bureaucrats if there’s a shortage
34:48
you have to keep the control not
34:50
realizing for that control shortage of
34:52
coal and by the control notice what
34:53
would have happened without the price
34:54
control oil would have been scarce sir
34:57
no question about that but is the Arab
34:58
embargo the result would have been a
34:59
higher price and those shortage but
35:02
because of the pie controls are on and
35:03
then extended for oil and gas and then
35:06
on and then on during the 70 this meant
35:08
for Pech awaiting the shortage and
35:11
making it a real crisis he couldn’t find
35:12
oil couldn’t find heating oil people
35:14
were dying in New York her for the coal
35:16
and gasoline disappears on the end again
35:19
yeah highways and so forth and so on and
35:24
I think this shortage the gasoline
35:28
shortage lasted for about two months
35:29
there was a bit long lines and
35:30
immediately of government in order to
35:31
handle us starts off with crazy
35:33
regulations just like the water shortage
35:36
the stuff here they had an obvious you
35:39
don’t have the installed meters
35:41
you only had to do with that allow the
35:42
price to go up it kept the price
35:44
controls and met the shortages by the
35:46
following sort of methods first of all
35:48
establishing priorities though is if
35:50
there’s a shortage immediately of
35:52
government steps into the side who
35:53
should be able to get the short
35:54
rationing of gas in other words there
35:56
was no there were no ration tickets oh
35:57
well they started making MASH and second
35:59
for the next crisis
36:01
and they said by the way one interested
36:04
a saying the next time we have gasoline
36:05
rationing won’t be like World War two we
36:07
were tyrannical didn’t allow people to
36:09
sell their own ration tickets other
36:11
people they’d allow them market and
36:13
ration tickets so if you want to if you
36:15
don’t want to use your car next weekend
36:17
so you know three gallon the 30 Yuans
36:19
worth of tickets to somebody else they
36:22
go I couldn’t call a free Morgan I’m
36:25
marketing or in ration ticket so cool
36:27
white market would have been legal any
36:30
rate they had also as a priority set up
36:32
for example top priorities got gasoline
36:35
also cop they were issued allowed to buy
36:37
gasoline others were screwed who are the
36:38
top priorities in a man one government
36:41
officials back naturally every
36:44
government officials considered
36:45
absolutely necessary for everything okay
36:47
your government official get an
36:48
immediate priority thinking you can get
36:50
gasoline at the market price – of course
36:52
farmers automatically beloved for some
36:56
reason American politics everybody loves
36:57
farmers so farmers get the second fire
37:00
everybody else gets have to scramble for
37:01
it I guess no doctor is on Sunday call
37:06
or something things like that doctors on
37:09
emergency and that’s about it everybody
37:12
else has to hoof it so and then they had
37:16
other regulation like anybody you
37:17
couldn’t you could only buy gasoline and
37:19
when if you get down the days when it
37:20
likes me if you like to take your
37:22
license ends in an odd number you can
37:24
only buy Monday and Friday if and then
37:25
even number you can only buy Tuesday and
37:27
Saturday you can’t buy gasoline at all
37:29
it’s out of there or Sunday except the
37:31
fourth but doctor everything yet special
37:32
means the whole let me give the whole
37:33
network of network of nonsense
37:36
and fortunately after about a month or
37:40
two of this I guess Nixon visors I love
37:43
way after this allow the price to go up
37:45
and I’ll cure the short and sure enough
37:47
he did it didn’t he kept the control
37:49
unfortunately but he they allow the
37:51
price to go up to a more or less a
37:52
market price the price of gasoline and
37:55
those days before 1973 was a magnificent
37:58
unlovely
37:58
30 cents a gallon something about it and
38:02
he allowed it to go up to about 50 cents
38:04
a gallon that was the end of it and was
38:05
like clear the market even with the
38:07
scarcity okay so the hysteria was over
38:10
but then of course the government sought
38:11
issuing crazy fertile they kept the
38:12
controls permanently or also the
38:14
terrible effects will go through the
38:16
minute
38:16
and they kept posters of other
38:19
regulations and they say issue also
38:22
decree to try to quote cure the energy
38:25
shortage unquote and this is a beginning
38:29
by the way uh 1974 of of the
38:31
unbelievably monstrous 55 mile an hour
38:33
speed limit nobody talking about safety
38:36
then look don’t talk about it save lives
38:37
right here that comes later than after
38:39
after rationalization afterward the
38:42
original rationale for the yet 55 moment
38:44
with a limit was a save gasoline the
38:46
cure the Shuar the shortage it was then
38:49
pointed out absolutely the thing was
38:52
passed that doesn’t really say much
38:53
gasoline you know first place what it
38:55
did I still does its to wait a lot of
38:58
time if you’re a truck driving from
39:01
carrying stuff from from California in
39:03
New York you have to drive at 55 miles
39:05
an hour you’re wasting I cook several
39:07
more days worth of course so the cost
39:09
gift was the strict applying an on the
39:10
price obviously very inefficient
39:13
efficiency like playing a negative rail
39:15
roller and I get off highway like
39:17
chopping up a highway and thinking
39:20
you’re helping out the economic
39:21
situation secondly there’s didn’t really
39:23
say much gas even without that because
39:25
most trucks were built in those days for
39:28
them maximum gasoline efficiency was
39:30
seventy miles an hour but of course the
39:32
drive is 55 of wasting more gas and
39:34
whatever otherwise that’s all that was
39:37
the thing is still on of course it’s the
39:38
people on our limit and will be what
39:41
I’ve been later but that’s and it’s
39:44
totally crazy and hearing these highways
39:45
out in the West there’s no people as
39:47
over the locals there’s no trees there’s
39:49
no nothing there’s nothing if you leave
39:50
the highway is that there’s different
39:52
than the highway right right you all
39:53
right right and okay anyway take a
39:56
10-minute break from the alleged saving
39:59
of fuel 55 mile an hour
40:03
now that was only you only came later
40:05
life-saving thing came ago yeah I
40:07
figured I never the first of all it’s
40:11
only a third of total vehicle mileage as
40:15
the runs on our streets or rows which we
40:18
know more than 55 miles an hour
40:20
otherwise about two thirds there’s on
40:22
city streets and places like that we
40:23
can’t nobody one hoax goes 70 miles an
40:26
hour so you take that into consideration
40:29
and total fuel savings only the maximum
40:33
2.6 percent and then when you realize
40:36
that many of the trucks as I said were
40:37
geared toward 70 miles an hour the most
40:38
efficient gear ratios and stuff like
40:41
that and the saving was minimal more
40:44
than offset by amount of time wasted the
40:46
fact we had spent several days more on
40:48
driving etc so up you know and then it
40:53
came near the next rationale for keeping
40:54
this thing with the alleged saving of
40:56
lives and which turns out to be a lot of
41:00
nonsense also the actually a traffic
41:03
deaths per the statistic is traffic
41:05
that’s per 100 million miles driven
41:08
these have been going down steadily
41:10
since 1925 had nothing to do with mile
41:14
an hour limits they were essentially due
41:17
to the fact that the car’s got safer and
41:19
Rose got safer for example this was a
41:22
statistic of traffic theft
41:27
creping that’s per 100 million miles
41:31
driven and 1925 it was 19 1935 was 15
41:45
thankee 45:10 frankie 65 and 1973 before
41:55
the 50 bucks on my own I was about four
41:57
it went down later than the 78th about
42:00
3.6 or something like that but most of
42:02
that then figure it out nothing to do
42:05
with a limit first of all was a general
42:08
trend I think general kind of downward
42:10
trying to attend traffic fatalities also
42:14
the fact that
42:15
the much the same reduction took place
42:18
in city streets where there never had
42:20
been any 70 miles now I was a limit the
42:22
change of a limits in 1755 does not
42:24
apply to city streets uh bird and all
42:26
that and there’s more of a reduction
42:28
there than in a you know interstate
42:30
highways so it’s figure to have the most
42:33
of the reduction from whatever reduction
42:34
took place it which wasn’t much in other
42:37
words went to half with four to three
42:38
point three or something like that at
42:40
the end of the seventies
42:42
most of that reduction was due to things
42:43
like more highway more interstate
42:45
highways slightly more interstate
42:49
highways of the fatalities a traffic
42:51
accident does not take place at high
42:52
speed they take place local streets and
42:55
roads the interstate highways are the
42:57
safest place and there were more
43:01
interstate highways per local Road
43:03
during the seventies and before the more
43:05
got built also better tires safety belt
43:09
coming in the rest of it in West Germany
43:12
where there’s a magnificence for the
43:14
tradition of no speed limits at all on
43:16
interstate highways it’s magnificent as
43:18
a matter of fact when you drive an auto
43:20
Vaughan’s which is a German gonna say
43:22
highways and you drive on at 90 miles an
43:24
hour you’ll be you’re in the slow lane
43:25
but you’re being passed very rapidly the
43:27
other car zipping along 100 the
43:30
accidents of our minimum what’s none of
43:31
them most of the West German traffic
43:33
does take place and local roads where
43:35
there are speed limits so huh what and
43:43
Oman I thought it was unlimited for any
43:54
rate the according to the traffic
43:58
I had according to traveling experts of
44:02
the what reduces fatality
44:05
he’s an accent as a minimum as a
44:07
constant flow constant speed overall to
44:10
what the speed is of course the real
44:11
problem comes in changing speeds your
44:13
first takes place and local roads and
44:14
then things like that it therefore makes
44:17
no sense at all to have a uniform speed
44:19
limit for the whole country every to
44:20
every local conditions are different and
44:22
a speed limit should be you know change
44:24
in accordance with a local condition
44:25
like 25 mile or in a school zone a lot
44:28
so stuff with
44:28
used to him in local roads and so
44:33
keeping the speed limit it’s a long
44:35
nonsense for us they for interstate
44:36
highways on the West look hardly need
44:38
people hardly anything hardly any cars
44:39
hardly any houses nothing and so anyway
44:43
that’s this whole thing’s becomes absurd
44:45
by the way on safety belts something I
44:48
should tell you about something which is
44:49
being carefully kept from us by the
44:50
establishment it’s true that the use of
44:52
safety belts reduce has reduced
44:54
fatalities of people in cars some extent
44:57
however it’s also increase in fatalities
44:59
of pedestrians made people drivers a
45:02
little bit more reckless and so they you
45:04
know they zip around hit hit pedestrian
45:06
the more they did before
45:08
that’s the sort of stuff a National
45:09
Safety Council never tells you any right
45:13
kind of mind on it study on that and the
45:16
other side of the coin of the safety
45:18
even though so okay to get back to the
45:25
energy you know the alleged energy
45:27
shortage when they allowed the price of
45:31
gasoline to go up to from thirty cents a
45:34
gallon to about fifty the shortage is
45:38
over however they kept this whole
45:39
structure of controls all during the
45:41
seventies they kept allocation controls
45:44
and price control forget from crude oil
45:46
and for gasoline and they also set up a
45:48
typical cartel or a rationing
45:51
arrangement where everybody was supposed
45:55
to be to plug your a gas station you you
45:57
you you had to be supplied by your
46:00
alleged employer whether it’s Exxon
46:02
wherever it is was a certain quota a
46:04
minimum quota of gasoline every month
46:06
the quota was set on conditions of 1973
46:09
before the great crisis and this
46:12
continued all during the nineteen
46:13
seventies this quota system as a result
46:16
yet something like this let’s say
46:17
there’s a gas station in upstate New
46:18
York sure a 1973 Seoul I don’t know I
46:21
have no idea how many gallons of gas
46:23
it’s all very much let’s say 2000 thank
46:26
you and and I’m state New York what
46:29
happens of course over time well I mean
46:31
you set the quota in the spring of 74 it
46:33
makes a little bit of sense of this the
46:35
quota
46:35
race the conditions are very similar
46:37
where like the base of the base year
46:39
however as time goes on has always
46:40
changing per se you know
46:42
Basin fast-changing society and over the
46:45
1970s upstate New York begins to
46:47
collapse who was not too high a level of
46:49
an in with the economy Vegas to collapse
46:52
the wingman biggest a class of people
46:53
move from New England upstate New
46:54
Yorkers California and Texas something
46:56
has been a big trend the population
46:58
shift from places like upstate New York
47:01
from Middle West West Virginia whatever
47:03
Iowa to Texas Oklahoma and Texas Florida
47:07
and California well as there’s also
47:10
quotas gas-station quota and thin in
47:13
upstate New York they might have a
47:15
minimum court of two thousand mother
47:17
might be only using a thousand they have
47:18
a thousand excess gallons sitting around
47:21
which they can never return at the end
47:22
of the month let’s say to excellent
47:24
another thing that happens is the the
47:27
refineries were compelled by a law of a
47:29
federal regulation that keeps shipping
47:31
the same amount of gasoline every month
47:32
regardless of the circuit of service of
47:35
the gas station in other words
47:37
essentially before that the say Exxon
47:40
and Mobil were employed employers so to
47:43
speak of these franchise gas stations
47:44
they didn’t shape up there were
47:46
complaints by consumers with a
47:47
vice-president of excellent something
47:48
they crack down the gas station
47:50
now let’s federal government so no you
47:51
can’t do that but also what happens you
47:53
have to supply the same 2,000 gallons a
47:54
month as a result I guess the individual
47:56
gas station began to the quality of
47:58
service is gonna go down this is very
48:00
visible the the I remember in the 70s a
48:04
friend of mine as an expert on economics
48:05
of gas and oil extractor whoops
48:07
why are they not giving any free maps
48:08
anymore I’m a big map fan I like what
48:11
some what the maps free maps again it
48:13
disappears by the mid 70s and also the
48:17
lovable washing him windshields and
48:19
general snapping to attention when you
48:21
drive up all the antis collapsed
48:22
especially of course in New York or
48:24
they’re never very lovable anyway but
48:28
yeah they stopped it stopped watching
48:30
the back of the window they you know all
48:32
the rest of it and so he said other
48:34
thing is they have a compulsory rule now
48:36
where they have to have a mobile mobile
48:39
whatever has to supply each gas station
48:41
same quota the gas stations funds there
48:43
knows the consumer and mobile they don’t
48:45
care anymore
48:46
so that beginning of the end the
48:47
cracking up a client and quality as a
48:50
result of the price control arrangement
48:52
rationing arrangement coming in so
48:55
another thing that had
48:55
these guys in western Massachusetts and
48:58
upstate New York have plenty of gasoline
49:00
and always had throughout the entire
49:02
crisis in like he said me no matter what
49:03
so wow they were swimming in gasoline
49:05
meantime and the new era is California
49:09
Texas etc especially California were
49:12
moved from the from the reaction so new
49:14
gas stations all the time they couldn’t
49:16
get their quota in other words they
49:18
found here’s a new gas station but they
49:20
didn’t have any quota from 1973 because
49:22
they weren’t around the 1973 they they
49:24
were screwed very much like new people
49:26
trying to buy a final apartment on a
49:27
rent control can’t get your quota so
49:29
they were many gas stations began to
49:31
collapse go bankrupt go under in
49:33
California starting about 1976 herself
49:37
and by the way there was no the list of
49:41
open open finally gotten getting their
49:43
action in here was all of this embargo
49:45
except it was a permanent rise in oil
49:48
prices which had been something like two
49:49
dollars a barrel before that crude oil
49:52
now went up to about ten approximately
49:56
$10 a barrel fivefold increase in the
49:59
early 70s and result by the way the
50:02
service rise and gasoline prices and oil
50:04
prices began to be some kind of
50:05
conservation people beginning in a cut
50:08
consumption not much yet the coast some
50:12
extent begins then and people beginning
50:15
to insulate their homes so they spend
50:17
less less money on fuel oil separate
50:20
cetera and it begins to be the slight
50:22
shift to our compact car as we get more
50:24
per gallon etcetera
50:28
anyway so California gas station begin
50:31
to collapse and then the price controls
50:33
was such after they allow the initial
50:36
increase to 50 cents a gallon a so you
50:37
can’t increase prices anymore
50:39
something like rent control now vacancy
50:41
decontrol you allow an initial increase
50:43
you can only increase your gasoline
50:46
prices if you can justify if I say you
50:48
increase in crude oil prices or you know
50:50
in their raw material the crude oil
50:52
price goes up by 10 percent you’re
50:54
allowed to increase your gas price of
50:55
gasoline price whatever sell however it
50:57
another crew labor costs down include
50:59
rent charges that sort of stuff so as a
51:02
result
51:02
gas stations are going to go out of
51:04
business in california the batteries in
51:05
other words the begin to losing money
51:07
because they weren’t allowed to increase
51:08
their
51:09
gasoline prices up to the free market
51:10
love them and so gasoline types is went
51:13
out very slowly remember the big
51:15
inflation during the late seventies 10%
51:17
a year 12% a year
51:18
gasoline prices only allowed to go up a
51:20
little bit they went up to about 70
51:22
cents why it’s a the late 70s 60 70
51:28
cents so you began to have these this
51:30
peculiar situation where gasoline
51:32
shortages in California I’m going to
51:34
show up and our Texas and particularly
51:39
California but lots of surpluses here
51:41
finally 1979 a second great crisis which
51:44
lasted even longer than the 73 the Iran
51:47
I think the Iran revolution which should
51:49
be excuse for that cutting off of
51:51
Iranian oil for a while and so the
51:58
result of that that’s applied again gets
52:00
cut and but we still have price controls
52:06
on gasoline and oil continuing from 1973
52:09
and so as the supply gets cut again and
52:12
the price of oil goes up by the way at
52:15
79 slices to about $30 a barrel further
52:18
tripling there’s all of that was again a
52:22
severe gasoline shortage oil shortage
52:24
almost at the same damn thing version 79
52:26
because the price prices were kept at
52:28
some of these times 65 cent from
52:30
wherever gallon
52:32
it begins in California same time New
52:34
York had plenty of gasoline California
52:36
was a cutting edge of this or they were
52:37
the they were the they didn’t have a
52:39
quota the gasoline shortage begins there
52:42
on the summer 79 it hits here in the
52:45
fall and as it hits the same sort of
52:49
stuff begins to have them blank markets
52:51
for example here an old customer of a
52:53
certain gas station you would you days
52:56
your park you’ll get you you say use a
52:58
certain garage gas station you you park
53:01
your car at night in the morning you get
53:02
there you find those magically the tank
53:04
is now filled even though the thing
53:06
rationing okay
53:07
that’s if you’re an old and valued
53:08
customer you’re not a total value casa
53:10
me whistles for it so favoritism begins
53:13
to come in the old customer bit black
53:16
market charges also in California begins
53:17
the gas station closing and having
53:20
gasoline also big lines now this
53:22
but long lines our first counseling
53:24
every night to write a car those are
53:25
sayings buses that’s our stuff or subway
53:27
so you’re there you have to get to work
53:29
in the 50 cars lineup and like that’s
53:33
the lines are very slow and so forth and
53:35
a lot of its Terry of anything at all
53:36
first of all what somebody wants a cut
53:38
in cutting in line and in this kind of
53:40
situation core go sort of fights you
53:42
want punch out the guy’s trying to cut
53:44
in murders even took place on gas line
53:47
social conflict visiting emerges and
53:51
hate general hatred of the gasoline
53:53
station take over here your fellow
53:54
comrades trying to get gasoline one less
53:57
of it and also crazy regulations coming
54:01
again once again rationing was decreed
54:03
by the federal government top priority
54:05
government official and always have
54:08
plenty gasoline second priority
54:11
performers I guess the same thing third
54:14
priority surging power doctors paying
54:16
high school merchants eat calls on
54:18
Sunday so again you have the same
54:21
odd-even license plate regulations even
54:23
more so than before this last about by
54:25
about six months least in California
54:26
that’s a much longer than the other the
54:28
73 crisis and in a situation such as
54:33
northern and upstate New York and
54:34
northern and western New England plenty
54:36
of gasoline ever had any shorter they
54:37
were swimming in it
54:38
but they had a quota they had they and
54:40
the companies had to spend them the oil
54:41
by federal mandate in California they
54:44
were closing up and after a few months
54:46
in New York City had the same problem
54:50
so once again the court what to do a bad
54:52
big problem big crisis etcetera cetera
54:55
Carter goes on the air Carter had a big
54:59
big crisis yeah yeah big energy problem
55:02
what to do about all this and he uh he
55:08
went apparently when he scheduled a big
55:10
TV speech on energy for a certain night
55:13
had everybody alerted something he
55:15
canceled an hour before yet said he had
55:17
to rethink everything this is the
55:19
beginning of the beginning of the view
55:20
that Carter was a nut took hold at that
55:25
point I could thing you’ve ever said and
55:28
he went up to the mountaintop I mean
55:29
literally I think what the Camp David he
55:30
communal a big shot that came in with
55:32
John Kenneth Galbraith it can mean with
55:33
everybody philosophers and he came back
55:36
with
55:36
moral crisis speech moral knowledge I
55:39
get to the America suffering normalize
55:41
didn’t go over very well either
55:42
any right the Y apparently what happened
55:45
was the inside dope on that with his his
55:49
two big economist Secretary of Treasury
55:50
Blumenthal who was the one of the big
55:52
economic embargo Secretary’s energy
55:54
Schlesinger who was they had been an
55:56
economist originally and the hip-deep in
55:58
this whole control system or favor of it
56:00
finally came in foods the only thing to
56:01
do some appeal well scrap the whole
56:03
thing go back to go back in the free
56:04
market that was their recommendation
56:06
apparently Carter was gonna do it which
56:08
would have ended the whole crisis right
56:09
then unfortunately Georgia a crony so
56:12
you can’t do that you look like a weak
56:13
president only we’d presidents repeal
56:16
controlled strong president imposed
56:18
control so purely for political reasons
56:21
he shifted the whole thing went and came
56:23
up with a famous energy package which
56:25
does make things worse
56:27
we’re going a little bit of that because
56:29
also some interesting ramifications of
56:31
us of this oil stuff and any rate what
56:34
finally happened and beginning will
56:37
happen they be ads in the paper which
56:39
which which gas stations don’t have gas
56:41
today
56:42
that’s worse stuff you know five or six
56:44
or seven or wherever they have only from
56:45
9:00 in the morning I love it eleven the
56:47
morning so very very scarce something
56:49
more like trying to get it so one one it
56:52
one the heroic gas station illegally
56:54
said okay we we have plenty of gasoline
56:56
were charging however a buck a gallon so
56:58
the traditional customer a lovable
57:00
seventy cents and they broke the pilot
57:03
wave they plenty gasoline twenty
57:04
four-hours-a-day yes sir
57:05
like the service back to no lines and
57:09
they and this magical thing paved the
57:11
way and then they all broke it all the
57:12
gas station here I started charging a
57:14
buck a gallon plenty of gasoline that I
57:16
think
57:16
blazed the path for the government of
57:19
sunset okay
57:20
they finally scrapped and for a lots of
57:22
headaches lots of recriminations they
57:24
finally scrapped the price control at
57:26
least the extent of allowing it to go up
57:28
once again to about a bucket gallon
57:29
bucket N and that was the end of it
57:31
okay that’s mean shortage for 79 took
57:34
longer with the sink in burger Carter
57:37
Administration was more resistant than
57:38
Nixon administration and then there were
57:39
a little bit of enlightenment so to
57:41
speak but any rate that was the the
57:43
upshot there’s a lot of other however
57:45
continued on a lot of other
57:46
ramifications here because in addition
57:49
to
57:50
this oil problem also natural gas crisis
57:53
brought about by very different elements
57:55
with them reinforcing the whole 79
57:58
problem
58:01
natural gas is a competitor horse oil
58:04
for energy as is coals also there’s also
58:07
a cold problem and natural gas is a
58:13
complicating those it’s transported by
58:15
pipeline and governments got the federal
58:17
government starts regulating pipelines
58:18
very early any rate in 1954 I think it
58:23
is the Supreme Court’s hotels the
58:26
federal Power Commission which those
58:27
days regulating the price of natural gas
58:29
but they had to regulate its proper
58:31
which didn’t want a regular Eisenhower
58:33
administration a more free market
58:34
oriented three courses no you have to
58:36
regulate it and they wind up late
58:38
fifties they freeze the price of natural
58:40
gas at nineteen fifty six or whatever
58:43
prices and they kept it that way from
58:47
then on a totally until the late
58:48
seventies a matter of fact maybe the
58:50
early 80s from actual the price of
58:52
natural gas was frozen at the old 1956
58:54
level now of course what has done how is
58:56
you tell what happens first nothing
58:57
happens because it’s a regular price and
59:00
then as the inflation proceeds the old
59:03
nineteen the lovable 1956 price becomes
59:05
ridiculous and becomes more and more
59:06
under the below the free market level so
59:11
here you have a situation where you have
59:12
natural gas and the price is frozen at
59:18
the base 50 level price keeps going up
59:21
because of inflation you wind up with
59:22
increasing shortages and the price
59:26
becomes more and more unrealistic the
59:28
natural gas takes a few years to change
59:30
prices because the way the industry runs
59:32
their long term contracts the pipeline
59:35
makes a long-term contract with a
59:36
producer so it takes about three or four
59:38
years for a price to change like a long
59:39
term lease so but after a while I began
59:42
to realize there’s a shortage and
59:44
meantime before the shortage developed
59:46
actual gas looks like a big hey let’s
59:48
get natural gas is much cheaper than oil
59:49
now because natural gas price is frozen
59:51
and so people so probably utilities in
59:54
the Northeast another place whether you
59:56
know regular homes and businesses start
59:58
shifting from oil and natural gas and
59:59
tech leaving : actually yes all the way
60:02
and
60:03
so natural gas becomes artificially
60:05
cheap and people of course find a lot
60:10
more of it and that’s the result of
60:12
increasing the shortage which begins to
60:14
develop by about the early 70s and so
60:17
it’s just been bigger and as a natural
60:20
gas gets the shortage gets worse and
60:22
worse people stop looking for it the
60:25
price is too cheap there’s no reason to
60:26
look for more natural gas supply starts
60:28
going down which makes it shortage even
60:30
worse so what finally begins to have it
60:33
a natural gas front about the same time
60:35
of the oil crisis the again once again
60:40
the authorities understand the incentive
60:42
effect they don’t understand the
60:43
rationing of effects they start an
60:44
incredible crazy quilt of natural gas
60:46
regulation much of which still exists a
60:48
little bit better
60:50
well they say okay we want more we
60:52
realize that the supply of natural gas
60:53
is falling off what we’ll do is we will
60:56
allow a higher price more or less
60:57
extreme market primacy it’s up here now
60:59
for new oil but old oil has to come in
61:02
at the cheap price the old lovable old
61:04
price of 1954 so they’ve set up a whole
61:07
insane system of price regulation where
61:09
we’re usually of course new gas and oil
61:11
gas or the Saint the same gas it’s the
61:14
same you have the same price now you
61:15
have a whole system of a whole patchwork
61:17
of control the new gas and whatever it
61:21
is per cheaper per cubic foot and the
61:23
old gas is much cheaper it’s up its up
61:25
you have a whole structure open same
61:27
price structure imposed by the
61:28
government well what happens of course
61:30
he have an old one
61:31
yes well what are you gonna do you not
61:33
gonna keep producing an old gas law half
61:34
the price that you get for a new yeah if
61:36
you shut down the old gas it’s not
61:38
looking for new gas coconutty system an
61:41
old gas disappears then where they get
61:42
abandoned on the old gas well it’s
61:44
perfectly usable since the price is half
61:46
of what you can get a third of us can
61:48
get it for new yes you start getting a
61:49
new gas also the fake fake new gas wells
61:52
pop pop you take an old gas where all
61:54
your sellers or some other guys Clay’s
61:56
our racket here he patches up a little
61:58
bit and causing the new gas yes well my
62:02
guess is whoa and there’s also some
62:04
middlemen buying and selling rights the
62:06
new gas the whole structured caused by
62:08
the control set up any rate what you
62:11
have is a big shortage of gas develops
62:13
in the Northeast and little West at
62:15
cetera and
62:16
time there was no get regulation for
62:18
intrastate all this regulations
62:19
interstate so you have those result of
62:24
that in Texas within Texas and Oklahoma
62:27
which of the major natural gas producers
62:29
they have a free market price for
62:32
natural gas worth in the New York or
62:34
Michigan or something they still have
62:36
the old control price like so and so uh
62:40
as a result the price of natural gas in
62:43
Texas like three times the amount of it
62:45
wasn’t in Michigan usually of course the
62:46
price of Michigan is higher because it
62:48
costs costs the money that ship the gas
62:51
from that from Texas to Michigan so
62:53
usually the price of natural gas in
62:56
Michigan say price of natural gas
62:59
Michigan equals the the price of natural
63:06
gas in Texas
63:09
plus the cost of shipping gas natural
63:14
gas from from Texas to Michigan so
63:18
usually the price in Michigan as well is
63:20
higher than the price in Texas okay but
63:22
because of this crazy situation of a
63:24
price control interstate but not
63:25
intrastate you wind up with three times
63:28
something like $1.00 per cubic foot or
63:30
whatever they’re got 30 cents three
63:33
times the amount in Texas it was all
63:34
Texas have plenty of natural gas and
63:35
Michigan has not every who’s gonna who
63:38
and you’re a Texas natural gas producer
63:40
are you gonna sell to other people
63:42
natural in Texas for free times a man or
63:44
sell it some somebody in Michigan for
63:46
one third of the amount obviously answer
63:47
is obvious there’s only there was never
63:49
any natural gas shortage in Texas or
63:51
Oklahoma there’s lots of shortages
63:52
outside little nutty situation so the
63:56
Carter Administration trying to cure
63:57
that by saving this old oil all gasp no
64:00
gasp didn’t work and slapping on
64:02
controls in Texas which didn’t help much
64:05
either simply made it created a shortage
64:07
in Texas didn’t relieve the shortage in
64:08
Michigan and New York and whatever so
64:12
anyway the natural the natural gas is
64:13
still a problem with then we’ll eat what
64:15
alleviated somewhat in the Carter
64:18
package the other nutty things were
64:21
going to the next on he didn’t he’s he’s
64:23
he said ok we will we will eliminate
64:26
price control oil price controls and
64:28
allocation controls all
64:30
federal control on natural get on the
64:32
Sudan a crude oil and on gasoline and of
64:34
heating oil as of September 1981 I think
64:38
I think this past I’ve heard 79 or 80
64:41
this is the quarter energy package so in
64:45
other words he said okay so time a 1981
64:46
we will eliminate these controls it was
64:48
a phase-out a natural gas he didn’t do
64:51
anything aback and Reagan came in the
64:55
first thing in regular the first week in
64:56
office and Reagan’s free-market week and
64:58
the first thing he said was eliminate
65:00
natural oil oil price controls and
65:03
allocations as January soon as he came
65:05
in so what he did was he simply advanced
65:07
the date from September to January
65:09
didn’t he didn’t de regular any more
65:12
than Carter would I would accept the
65:13
Carter would have taken up nine more
65:14
months or over any right the so he
65:18
immediately eliminated all price
65:19
controls on and an allocation control
65:21
rationing controls on all petroleum
65:24
products and petroleum and the result
65:26
was you’re keeping it below the free
65:28
market price result was which could have
65:31
been predicted by fact I did predict an
65:33
economics you know 251 but you’re
65:36
keeping it below the market prices
65:37
initially there’s a increase in price
65:39
we’ve got a week or two weeks then bingo
65:41
is you now have a free market there’s no
65:43
problem that shortages really people
65:46
thoughts finding more and more oil
65:47
producing more and more well as a result
65:49
was a decline in price which continues
65:51
to this day in fact was the beginning of
65:52
the great price decline started
65:53
immediately after the elimination of the
65:56
price control so here most people were
65:58
predicting a discrete terrible he wants
65:59
go whoop or prices will double or triple
66:02
from $30 a barrel up separate whatever
66:05
these hunts bus isn’t gasoline a few are
66:08
just the opposite happened this is
66:10
beginning of the great turndown soon as
66:11
Reagan eliminated price controls on oil
66:13
and gasoline gasoline arrested but the
66:16
price started going down both nationally
66:17
and animal food oil so was $30 a barrel
66:20
that play is now XANA that’s magnificent
66:23
a violation I’m down about 15 dropping
66:26
continually so this is the beginning of
66:29
the breaking of the OPEC cartel the
66:31
elimination of the price control the
66:35
rise in price is very short and it’s and
66:38
as soon as the free market real they
66:39
realize free Mars development it’s not
66:41
oil started pouring in from everywhere
66:43
another thing that happened OPEC was
66:45
that as a result of the OPEC driving a
66:47
price up to $3 a barrel other countries
66:49
began to look for oil not just OPEC
66:50
countries you have a big shift in
66:52
proportion one of the reasons why the
66:54
OPEC cartel is now collapsed most oil is
66:57
now being produced by non-opec countries
66:58
Great Britain or the North Sea oil thing
67:00
Mexico various countries that are
67:02
outside the cartel could therefore it
67:05
didn’t restrict their production where
67:07
Saudi Arabia and the other OPEC
67:09
countries are constantly keeping the
67:10
stricking production as they can keep
67:11
the price up these other countries are
67:13
not part of them here they have taking
67:14
it there busting the cartel that cartel
67:16
busters that come in and they lower up
67:18
they you know it’s to limit their
67:19
production they just lower the price
67:20
result of that is then the Smashing of
67:22
OPEC cartel in long last and I’m a
67:26
friend of mine who’s well I like
67:28
economics expert claims gonna go down $8
67:30
a pound
67:30
anyway it’s certainly rolling in that
67:31
direction and by the way the same people
67:34
who are the belly aching for ten years
67:35
or more the OPEC is holding us old by
67:38
the throat was creating inflation all
67:39
that these same people in our belly
67:41
aching is a terrible thing price of oil
67:42
is falling I can’t be terrible things
67:45
arise and also the for something very
67:47
odd about this actually we should
67:49
welcome price for the all time should be
67:52
if it goes down to zero it even better
67:55
okay

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