Ellen Wald's Misunderstandings about Gasoline Shortages and Oil Markets

It takes price controls to cause a shortage

By David R Henderson. 

"That leaves us at the precipice of the worst-case global energy scenario. The United States, by virtue of its robust domestic oil and gas industry and its synergy with Canada’s oil industry, is in the best possible place to weather a global energy crisis. If this war had happened in 2012, we might soon have been reliving 1973, complete with gasoline lines and rationing. But it is 2026, and domestic oil production is the highest ever. Our imports from Persian Gulf countries are the lowest since 1985 and account for a small percentage of the oil we import and consume.

So writes Ellen R. Wald, “This is How an Energy Crisis Starts,” The Free Press, March 8, 2026.

This paragraph leaves out a crucial factor and also shows Wald’s misunderstanding of the world oil market.

The crucial missing factor: whether or not we have price controls on oil and gasoline. The reason for the gasoline lines and rationing in 1973, as almost all informed economists know, is the presence of Nixon’s price controls. These controls prevented the domestic price of oil from rising to $11 per barrel, which became the world price in late 1973 after OPEC cut output. That caused a shortage at both the crude level and the retail gasoline level. Countries, like Switzerland, that avoided price controls also avoided gasoline lines. Contrary to Wald, if this war had happened in 2012, we would have avoided shortages and gasoline lines if our governments had avoided price controls.

Wald also shows a misunderstanding in the quoted paragraph about how world oil markets work. Whether or not we produce much or little of the oil we consume, we will be subject to the world oil price. Price is determined in a world market. I’m guessing you noticed that fact if you drove by a gasoline pump today.

To be fair, it is true that the increase in the price of oil hurts us less when we import little than when we import a lot. The reason is that “us” includes oil producers. So most of the loss to U.S. consumers goes to U.S. producers."