In his first major political decision as president, Ronald Reagan has pardoned the oil companies: The long national nightmare of energy regulation is over.
On the political Richter scale, President Reagan's action Wednesday removing price controls on crude oil, gasoline and propane is a faint aftershock compared to the earthquake Gerald Ford caused with his pardon of Richard Nixon in the first days of his presidency. The controls were due to expire anyway on Sept. 30; Reagan's action merely speeds up the process.
But as a symbol, Reagan's action sends out several powerful messages about the new administration's intentions.
The first is that there is nothing wrong with higher oil company profits. No other president would have invited the oil companies to increase prices and profits, but that is the effect of Reagan's decision. In response, Exxon Corp. and Shell Oil Co. yesterday led what is certain to be a parade of price increases, adding from 1 cent to 3 cents a gallon to wholesale fuel prices in different parts of the country. Chevron U.S.A. Inc. increased its wholesale prices of diesel and heating oil by 5 cents a gallon and added 6 cents to the price of its gasoline.
After nine years of regulation, energy companies now are free to charge what the market will bear for their products.
It doesn't take much of a memory to recall the heat of the struggle over decontrol -- arguably the fiercest political battle of the 1970s aside from Watergate and Vietnam.
An echo of that conflict sounded Wednesday in the protests from Ralph Nader and other leaders of the consumer movement, who attacked Reagan's decision on familiar grounds. "Between now and Oct. 1, Americans will consume about 65 billion gallons of gasoline," the Consumer Energy Council said. "Every penny increase per gallon takes $650 million away from consumers," the council said.
By advancing the end of energy price controls, Reagan in effect has assured oil companies of an additional $10 billion to $16 billion in revenues, according to administration estimates.
Decontrol also created some overnight profits for producers with price-controlled oil in storage, as a closer look at the regulations shows.
The controls that Reagan abolished, dating back to 1973, specified several different prices for U.S. oil, based on the date that oil first was produced from a particular property.
With decontrol, producers owning "old" oil enjoyed an immediate price markup of $30 a barrel, while "upper tier" oil owners got a $20-a-barrel markup.
But Reagan aides believe that such windfalls are the result of regulation, and continuation of controls only would have increased the windfall. If Reagan hadn't ended controls now, more and more producers would have found legal ways to hold onto their inventories of lower-priced, controlled oil waiting for the price to rise on Oct. 1.
Some estimates within the Reagan White House suggested that the withholding could reach 300,000 barrels a day, enough to cause supplies to tighten and send refiners into the spot market, bidding up the price of oil -- and thus, the price paid by consumers for gasoline and fuel oil, some administration officials say.
On this theory, instant decontrol could save customers money, administration aides said.
But there is a more fundamental message from Reagan's decontrol decision.
The controls over the price and distribution of oil and gasoline were rooted in the principle that government had a duty to see that the shock of huge oil price increases by the foreign oil cartel was spread fairly throughout the society.
In the end, the struggle to assure the fairness of a thickening maze of energy regulation overwhelmed the Carter administration. The message from the Reagan administration is that it doesn't plan to try.
Reagan's decontrol order not only eliminates price controls on crude oil, gasoline and petroleum, it abolishes the rules that determined where refiners must buy oil and sell their products. In the view of the Reagan administration, these rules did more to create energy shortages than ration supplies fairly.
Attempts to police this system were hopeless without an army of government accountants, lawyers and regulators, Reagan aides maintain. And in moments of candor, Carter administration officials agreed.
The production of oil, its distribution and its price are to be left to the oil industry because, in Reagan's view, only the industry can add to the country's energy resources.
In many other ways, the federal government tries to be society's referee, assuring equality in the tax burden individuals and companies pay and compeling fair hiring practices by employers, and equal opportunity of education. How far the new administration proposes to move away from these duties is one of the vital questions to be answered.