The administration's chief inflation fighter said yesterday he is more concerned about protecting the United States from energy blackmail than controlling the price of oil -- and that it might take a high tax on gasoline or other drastic measures to achieve that protection.
Alfred Kahn, chairman of the Council on Wage and Price Stability, told a congressional subcommittee that curtailing consumption "so we can say to Iran: Keep your oil" might require a change as sweeping as a 25- to 50-cent tax on gasoline or gas rationing.
Kahn called rationing "a change equally as dramatic" as an attempt to impose mandatory controls, but less futile. Kahn compared controls to "trying to push water uphill."
Although Kahn said the administration has talked about mandatory controls, a gasoline tax and rationing, none of the proposals has been adopted as administration policy, he said.
The discussion of alternatives for curtailing supplies has come up recently in the face of a possible cutoff of oil from Iran. Contingency planning for that possibility is underway at the Department of Energy under Deputy Secretary John Sawhill, according to an administation official.
Kahn said he is increasingly opposed to mandatory price controls, even though prices will rise without them. "In talking about our energy problems, it makes no sense to hold prices down," he said. Inflation will not be cured by "subsidizing the purchase of oil," said Kahn.
So long as an imbalance between supply and demand for oil exists, the wage and price council is largely ineffective in fighting higher energy prices, he conceded. But he said the council had been successful in getting some price increase rollbacks and promoting restraint by oil companies in other cases.
Kahn said the council has found preliminary indications that major oil companies may be violating voluntary standards for price increases. Among those indications, he said, are discrepancies between industrywide data on profit margins and what oil companies have reported company-by-company to the council.
Kahn also said that a preliminary review of reports by seven major oil companies on their first year under monitoring by the council suggested that three companies might be out of compliance. Kahn declined to name the three companies.
Kahn appeared before the House energy and power subcommittee at a hearing on how well the oil companies are complying with the council's guidelines.
"The guidelines appear to be totally ineffective in restraining price increases in the oil industry to modest or reasonable levels," said subcommittee Chairman John D. Dingell (D-Mich). He also said there appeared to be circumstantial evidence that "price gouging has occurred in heating oil prices."
"It's time to stop pretending this program (the administration's attempts to control inflation) has any meaning as far as energy is concerned. It's essentially a charade," said Rep. Albert Gore Jr. (D-Tenn).
Enforcing price guidelines is not the solution to the energy problem, Kahn said. "If you're talking about a solution to the energy problem, price has got to be a major part of it -- you've got to let price go up," said Kahn. The inequities that produces can be corrected through a tax on windfall profits that can be used to correct the inequities, he said.
"It does not suffice to say prices are going up so someone has to be hung," said Kahn, who was questioned repeatedly about whether the council and the Department of Energy are doing what they should to monitor price increases.
"It is at least conceivable that God is not doing his job," said Kahn, who said the problems may reflect a new era of resource scarcity in conflict with patterns of consumption.