THE ONLY FAIR and sensible way to set the price of natural gas is to deregulate it completely. That means ending the long and unhappy experiment in setting the price through government regulation. Federal price ceilings have consistently held gas prices too low - far lower than oil prices - and the result is a series of gas shortages that seem to be getting steadily worse.
As long as gas in cheaper than oil, both homeowners and businesses are going to gamble on warm weather, with unpleasant consequences when the weather turns unexpectedly cold. The cost of these shortages, in layoffs and economic disruption like last winter's, is going to he higher than the cost of letting prices rise. President Carter's energy program, in its weakest and silliest section, would deliberately continue to hold gas cheaper than oil. But if energy policy is to be established by the rule of social justice, some thought might usefully be given to those people whose jobs depend on a steady flow of gas in cold years as well as warm ones.
Congress is bitterly divided on the issue of deregulation. This section of the energy bill will probably be settled by only one or two votes in the House Commerce Committee and, perhaps, by little more than that in the House itself. Some of the opposition comes from the old-line consumers' organizations that equate low gas prices with public virtue. With conservation an urgent necessity, that's a dangerous anachronism. A lot of congressmen worry about windfall profits to gas producers as the value of their reserves rises. It's an altogether proper concern, but the answer is taxation. To try to control gas industry profits by deranging the whole nation's fuel markets is absurd. Here, the reader will perceive, we disagree with the position argued by Lee White on the opposite page.
But there's another and more substantial range of concerns about gas pricing. The sudden impact of large and unexpected price jumps on consumers - both households and industries - is painful and harmful. James Schlesinger, the President's energy planner, speculated the other day that, without regulation, prices of gas might have shot up to three or four times the present level during last winter's cold snap. In response to this fear, we have a modest suggestion to offer.
The suggestion is drawn from the commodity markets. The price of orange juice, for example, falls when demand drops. But it is permitted to fall only so many cents a pound in any one day. That prevents sudden leaps, collapses, speculative raids and panics.
In deregulating gas, Congress might well decree that in any year the price can move only, say, 15 per cent from the previous year's average. If a daily limit is right for orange juice, an annual limit sounds more suitable for natural gas with its highly seasonal swings. We would expect the price of gas to move up steadily until it was a bit above the cost of oil - the premium reflecting the greater ease of handling it and its cleanliness. But if there were sudden emergency, like a cold January or a coal strike, the price could go up only 15 per cent. Mr. Schlesinger's nightmare would be prevented. The price could not go spiking through the roof. Meanwhile, the shortages would end. Some users would switch to cheaper fuels. Others would cut back consumption. That, after all, is presumably the point of the President's energy policy.
But consumers have a right to protection from sudden, drastic price changes. Most families don't have much financial flexibility from month to month, what with mortgages and installments and all the demands of an established rhythm of life. It takes time to adjust, and that annual limit provides a shock absorber.
The price of gas to consumers will rise anyway. Under regulation the government will increasingly try to ease the shortages by promoting the import of very expensive liquefied gas from Algeria or the manufacture of synthetic gas, averaging these prices in with the cheap domestic natural gas. But that's doing it the hard way. The simpler and more effective answer to the shortages is deregulation - with a reliable shock absorber.