BEHIND THE TROUBLES of the Shell Oil Company lies an interesting confusion of public policies. Shell has now begun to ration deliveries of unleaded gasoline to its service stations. No general shortage of gasoline is in prospect -- but there is likely to be a certain stringency in the supply of premium unleaded types. The inconvenience to Shell's customers will serve a useful purpose if it focuses attention on the Carter administration's reluctance to reconcile three cherished policies that, unfortunately, all point in different directions.
To enforce fuel conservation, the administration believes that fuel costs ought to be permitted to rise. In principle, it concedes that the longstanding price controls ought to be lifted from gasoline. But to combat inflation, the administration resists lifting those controls just now. At the same time, the administration is equally committed to reducing the air pollution generated by automobiles.To cut pollution, most of the new cars are fitted with a device known as the catalytic converter. Because lead destroys the catalyst, these cars are required by law to use only unleaded gasoline. But unleaded gasoline -- and particularly high-octane unleaded gasoline -- is more difficult and expensive to make than the kind with lead in it. Under price controls, companies find unleaded gas less profitable than other oil products. Does it astonish you that, under these circumstances, the supply of unleaded premium gasoline would be running a bit short?
Shell's present embarrassment begins with the weather. The autumn was memorably warm and fair; people went for long drives, pushing gasoline consumption to record levels for this time of year. For most of the past several years, the price-control system had had no actual effect on prices because competitive pressures had kept them below the ceilings. But as this autumn's unexpected surge of driving pushed consumption up, some companies began to bump against the limits.
This exceedingly complex price-control system sets a different ceiling for each company. Companies can pass through certain costs that vary with their individual operations. As it worked out, Shell's price throughout the fall was held 1 to 3 cents below its competitors' -- enough of a difference to send Shell's sales up three times as fast as the national average. At that point, refinery malfunctions cut the company's production. Meanwhile, it was running out of accumulated costs to pass through to the customer, and the price-control rules required it last week to drop its price another half cent a gallon. In response, the company began to limit deliveries. Other companies are now beginning to impose similar limits.
Here you have three worthy and valuable goals: conservation, price stability and clean air. Typically, the Carter administration favors them all. Also typically, it can't bring itself to choose among them.
But the obvious solution is to abandon the price controls. If people cannot conveniently find unleaded premium gasoline, the temptation to use the leaded kind will rise and the cost will be assessed in increased air pollution. A rising price of fuel would certainly add to the inflation rate. But holding the price down artifically will only lead to further records in gasoline consumption, increasing oil imports in ways that are even more inflationary. The price controls promise only damage to the environment and harrassment to the consumer. The case of unleaded gasoline is turning into a classic illustration of the way that price controls don't work.