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Milton Friedman on Energy and oil

The most effective way to cut consumption and encourage production is simply to let the prices of oil products rise to whatever level it takes to clear the market. The higher prices would give each of the 210 million residents of the U.S. a direct incentive to economize on oil, to find substitutes for oil, to increase the supply of oil.

Context. From a Newsweek column written about a month into the Arab oil embargo of 1973, while retail gasoline and fuel oil prices were still held down under the price controls President Nixon began on August 15, 1971. Later in the column he adds that what is called for is higher prices for oil products “relative to other products—not general inflation.”

Why Some Prices Should Rise
Column, 1973, Newsweek (November 19, 1973); reprinted in full in the Congressional Record, Extensions of Remarks, November 29, 1973, p. 38775, introduced by Representative John H. Rousselot of California, who gives it as “an article which appeared in the November 19, 1973, issue of Newsweek”, Congressional Record, November 29, 1973, p. 38775
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Cite this passage

Milton Friedman, “Why Some Prices Should Rise” (Newsweek (November 19, 1973); reprinted in full in the Congressional Record, Extensions of Remarks, November 29, 1973, p. 38775, introduced by Representative John H. Rousselot of California, who gives it as “an article which appeared in the November 19, 1973, issue of Newsweek”, 1973), Congressional Record, November 29, 1973, p. 38775. https://miltonfriedman.org/quotes/let-prices-oil-products-rise-clear-market-1973

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He also said

  1. The oil problem offers a particularly clear illustration of how the price system promotes both freedom and efficiency, how it enables millions of us to cooperate voluntarily with one another in our common interest. It brings out equally why the only alternative to the price system is compulsion and the use of force.

    Context. From a Newsweek column written about a month into the Arab oil embargo of 1973, while retail gasoline and fuel oil prices were still held down under the price controls President Nixon began on August 15, 1971.

    Why Some Prices Should Rise
    Column, 1973, Newsweek (November 19, 1973); reprinted in full in the Congressional Record, Extensions of Remarks, November 29, 1973, p. 38775, introduced by Representative John H. Rousselot of California, who gives it as “an article which appeared in the November 19, 1973, issue of Newsweek”, Congressional Record, November 29, 1973, p. 38775
    Checked against the sourceRead the original
  2. The current oil crisis has not been produced by the oil companies. It is a result of governmental mismanagement exacerbated by the Mideast war. The price of natural gas at the wellhead has been held down for years by government edict. Since Aug. 15, 1971, the price of retail gasoline and of fuel oil has been held down by the successive phases. The result has been to encourage consumption and discourage both current production and the expansion of capacity. It took the Mideast war to bring these evil effects of price-fixing to a boil.

    Context. From a Newsweek column written about a month into the Arab oil embargo of 1973, while retail gasoline and fuel oil prices were still held down under the price controls President Nixon began on August 15, 1971. “The successive phases” are the phases of the Nixon price controls that followed the 1971 freeze.

    Why Some Prices Should Rise
    Column, 1973, Newsweek (November 19, 1973); reprinted in full in the Congressional Record, Extensions of Remarks, November 29, 1973, p. 38775, introduced by Representative John H. Rousselot of California, who gives it as “an article which appeared in the November 19, 1973, issue of Newsweek”, Congressional Record, November 29, 1973, p. 38775
    Checked against the sourceRead the original
  3. I am not enough of an expert—no one is—to know the million and one places where prices fixed by bureaucrats on the basis of arbitrary rules and accidental starting points have created distortions and shortages. … They are hidden in the interstices of an incredibly complex production system that cannot operate without the enormous efficiency of a market-price system to adapt changing demands to changing supplies. And many have been overcome by millions of citizens who found ways to avoid or evade the price controls.

    Context. From a Newsweek column written during the 1973 oil shortages, nine weeks into the Arab oil embargo and more than two years after President Nixon froze wages and prices on August 15, 1971.

    Why Now?
    Column, 1973, Newsweek (December 31, 1973); reprinted in full in the Congressional Record, Extensions of Remarks, January 24, 1974, p. 801, introduced by Representative John M. Ashbrook, who gives the issue as “the December 31, 1973 issue of Newsweek”, and reprinted again the same day at pp. 807 to 808 by Representative Earl F. Landgrebe, Congressional Record, January 24, 1974, p. 801
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