The Performance of Government in Energy Regulations

Government performance in energy regulation is evaluated in terms of optimum resource conservation, which may be attained via free market allocation or allocation by direct government regulations, the use of taxation, or the use of subsidies. With the assumption that government regulation will also be economically efficient, a large body of opinion argues for governmental intervention to use less energy. A review of US energy policy in such areas as oil and natural gas prices, gasoline prices, and price controls and decontrols indicates that government intervention has been counterproductive with respect to resource conservation. President Carter has called for a comprehensive national energy policy with the federal government in control, but the record of the past does not indicate that more intervention will improve resource allocation. Perhaps the market itself should be left to allocate scarce resources.