THE ALGERIAN GAS ruling now confronts the Carter administration with a painful choice. Until now, its energy policy has come in two different styles - one for oil, the other for natural gas. Unfortunately, the two are inconsistent with each other. It's like the acrobat who rides two horses with a foot on either saddle. The trick is hard enough when the horses are pointed the same way. But when they start moving in different directions, the rider's difficulties rapidly escalate. That is roughly where the Algerian decision leaves the administration.
Last week a federal hearing officer approved a gigantic project to import Algerian natural gas at a price three times the legal ceiling for gas produced in this country. If that strikes you as peculiar, you're on the right track. The gas is not expensive in Algeria. But the cost is driven up by the elaborate process of liquefying it, carrying it across the Atlantic in cryogenic tankers, converting it back into gas at a prot in Canada and bringing it down a new pipeline into New York and Pennsylvania. The author of the plan is Tenneco, Inc., a large pipeline company, which says that it will soon need the gas to serve its present customers.
Here we have a clear and concrete illustration of a point that a number of economists have recently been making, in their academic and theoretical way. President Carter says that price controls on natural economists reply that the protection is only temporary. The price controls create shortages. To meet the shortages, the government resorts to increasingly esoteric and expensive new sources. The expensive new gas, and the average cost to the consumer rises. It eventually rises - to the vast astonishment of everyone but the economists - to the price that it would have reached without price controls. The only difference is that an increasing proportion of the gas comes, of course, from other countries.
You can see it happening. The present ceiling for domestic gas at the wellhead is $1.47 per thousand cubic feet. The Alaskan gas will reach consumers - if that gigantic pipeline is ever built - at a price approaching $3. Last spring the Federal Power Commission approved a contract to import Algerian liquefied gas at $3.37. Now the Tenneco project would bring in a much larger volume of Algerian gas at $4.50. The Algerian contracts, incidentally, contain escalator clauses to lift these prices even further as the OPEC price of oil goes up.
For the past six months President Carter and his Secretary of Energy, James Schlesinger, have been telling the country that it has to hold down its oil consumption. The reason is that American dependence on foreign sources has reached a dangerous level. Mr. Schlesinger also points out that averaging cheap domestic oil with expensive foreign oil creates a tremendous subsidy for the imports - which, in turn, helps explain why the country is importing so much. You may have noticed that the Algerian gas deal would duplicate both of these errors. It would increase imports of energy - specifically, from Arab sources - and it would follow a price-averaging formula that subsidizes an expensive foreign supply with a cheap domestic one.
Until last month, the hearing officer's decision would have gone to the Federal Power Commission. But the FPC vanished with the establishment of the new Department of Energy, in the labyrinths of which the decision is now moving upward for review. Itwill be interesting to see what Secretary Schlesinger has to say about it.