July 20, 1977

Deregulation Means More Competition

As Congress begins debate on still another proposal to deregulate an American industry - in this instance the gas and oil businesses - it is enlightening to see who purrs and who barks.

The natural gas companies are anxious to be deregulated.  The cost of their product is held to $1.45 per thousand cubic feet, making it the lowest priced fuel on the market except firewood.

Natural gas is the cleanest burning, highest thermal content, most flexible of all energy forms.  By all the natural laws of supply and demand it should be the highest priced fuel.  Yet, the politicians keep the price less than the actual cost of production, thereby creating an artificial scarcity as producers drain old wells and are denied funds with which to find and drill new sources.

This artificial, political shortage puts the energy burden on the next best fuel - oil.  Again, demand out runs supply, and unregulated foreign producers are allowed to sell oil in the United States at exorbitant prices set by the Arabs.

U.S. natural gas producers say that if they are allowed to make a fair profit they will be able to tap known but costly reserves that will last us 200 more years.  Regulated, low-cost gas is expected to be exhausted in 10 years.  A well-head price about twice the present rate is believed to be sufficient to make low grade reserves marketable.

It seems more sensible to pay twice as much to American producers for all the gas and oil we want then to pay twice as much to Arab producers for less energy than we need.

But let us not be diverted from this week's premise by the past stupidity of Congress.  Take note that the natural gas industry is lobbying hard to get out from under regulation.

The present Congress, startled by collapse of once popular control schemes, is flirting with turning several industries loose.

Deregulation is proposed for the stock brokerage business, for air lines, and for truck lines.  Yet, these giants of capitalism react in near panic.  Unrestrained competition would ruin them, they contend.

It is most curious to hear the regulated big boys recant their banquet table platitudes about private enterprise.

Competition, we discover, is strictly for the small independent business man and for the retail merchant.  The big boys want to be guaranteed a near monopoly with protected markets and protected prices.

Regulation was invented by the government ostensibly to protect the consumer from being gouged.  Prices were set by law, and markets parceled out by bureaucrats.

Today, many years later, we discover that the consumer still pays higher rates than he needs to.  The regulators, by tampering with the dynamic forces of competition, have entrenched a limited number of suppliers while doing nothing at all for consumers.

Entrenchment always works to the long range disadvantage of the consumer, but the supplier benefits according to his market.

Thus we discover the natural gas producers striving for a free market because currently it is at a realistic price level that will produce big profits.

The stock market, air travel and freight handling markets are declining.  Additional competition that normally arises from this condition will depress profits, so those industries affected beg for protection.

Congress has a regulatory tiger by the tail and can't let go.

Gas rates are artificially low and certainly will rise with deregulation.  Consumers certainly will howl and probably will not vote for the politicians responsible.

Brokerage, airline and trucking rates are artificially high and certainly will shrink with deregulation.  The management and unions suffering from smaller incomes certainly will complain and probably will not contribute to the campaigns of the politicians.

In the face of so many "certainties" Congress will do what it traditionally does in such circumstances - toss token adjustments in all directions in hopes some of it will fall in the right places.

This solves nothing, but postpones the day of reckoning - by which time a miracle may occur.

The only long-range solution is total deregulation of all businesses.

But this is a can of worms Congress has shown little ability to cope with.  How, now, do you separate the true utilities from those service industries that can benefit from deregulation?

How far to go is a question but the direction is clear - more competition.

Author: Lindsey Williams