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Europe’s energy policy in 2022 resembles America’s in 1979

Paul Krugman
Published Wed, Aug 31, 2022 · 05:53 PM

YOU probably have to be a senior citizen to remember the gasoline shortages of 1979. I am, and I do. I also remember how demoralising they were. Then as now, outside a few big cities, America was a highly car-dependent nation, and waiting in long lines, not knowing whether you would be able to fill up, was deeply disconcerting.

What caused those shortages? The precipitating event was the Iranian Revolution, which sent world oil prices soaring. But an oil price surge in itself needn’t mean gasoline shortages; it could — as we’ve seen recently — just mean higher prices at the pump.

The problem was that policymakers weren’t willing to see that global price hike fully passed on to US consumers, given that only about 40 per cent of the oil we consumed was imported. So they tried to limit the hit with various controls on prices and distribution; we needn’t go into the details. The point is that as every economics textbook will tell you, price controls…

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