PRESIDENT CARTER said yesterday that he hasn't made up his mind about ending the price controls on gasoline. It figures. Sen. Henry M. Jackson (D-Wash.), the chairman of the Energy Committee, offers the view that, even if Mr. Carter recommends ending the controls, the Senate will veto it. And he is probably right about that. Meanwhile, the price controls are creating a shortage of premium grade unleaded gasoline, and nobody seems to have any very useful ideas about a remedy. If there's a widening shortage of unleaded gasoline, people will certainly use the other kind regardless of legal restrictions and air pollution. Incidentally, we note that at some local service stations the price of unleaded premium-the grade that's in short supply-has reached 84 cents a gallon.
There are now two separate issues of fuel price control before the federal government. In addition to the controls on gasoline, there also the separate controls on the crude oil from which the gasoline is made. Because the government holds down the price of crude oil, this country continues to be in the bizarre position of subsidizing the oil imports that the samegovernment regularly denounces as excessive and dangerous to the national security. Because the government holds down the price of gasoline, most grades are cheaper today in real terms-that is, adjusted for inflation-than four years ago. Because gas is cheaper, people use more of it. Does it surprise you that Americans are now burning it up on the highways at record rates?
In the great struggle over fuel price controls that is now going on in and around the White House, there are quite different constituencies for the two different decontrol proposals. The people who worry mostly about domestic energy policy would prefer, if forced to choose, to free gasoline prices now and leave crude oil controls until later. The people who worry mostly about foreign policy, and relations with our allies, would rather decontrol crude oil immediately. President Carter promised it, publicily and explicitly, at his economic summit meeting last July with the heads of the other major industrial countries. If he backs off that commitment, he will do substantial damage to the prospects for any future summit-including the informal U.S.-French-German-British get-together early next year in Guadeloupe.
But if Mr. Carter leaves gasoline under control, the present incipient shortage will get worse next summer with the annual increase in driving and a rising proportion of cars designed for unleaded fuel. It's important to be precise about the nature of this shortage, and the reason for it. At the moment, there's plenty of gasoline of the conventional varieties. The refiners are making a very adequate profit on it. But the market is rapidly moving toward a new product-unleaded premium gasoline-that is more difficult to produce and requires the refiners to make heavy investments in new facilities. The present price controls were written in 1973 as a temporary measure, with no thought ot the possibility of a national need for new types of gasoline. As a result, premium unleaded gasoline is much less profitable than the other grades and, for reasons that Adam Smith would have understood, less of it is being made.
But if the controls come off, the administration fears, labor unions are likely to use the highly visible rise in fuel prices to justify hughwage demands. The most sensible course for Mr. Carter to follow is the one laid down earlier this year in the congressional compromise on natural gas. That means lifting the price ceilings for both gasoline and crude oil, gradually but steadily, until, perhaps a couple of years from now, they become irrelevant. Gradual escalation avoids sudden shocks to the public. But it promises a more satisfactory supply of the right kinds of gasoline in the future. There isn't much protection to the consumer in price controls that mean spot shortage and air pollution.