Energy prices and public policy
An unusual collaboration between an organization of business executives and a group of conservationists has produced an energy policy statement that calls for continuing the recent shifts toward market-determined energy prices so that production, consumption, and conservation decisions can reflect real costs. Under such a market-oriented system, the poor should receive adequate welfare increases to compensate for the estimated $3-7 billion drop in their annual real income caused by rising energy prices over the past 8 years. Moreover, the government should step up efforts to upgrade the energy efficiency of the homes of low-income consumers. Although energy price deregulation could expose the US economy to more inflationary pressures in the short term, the alternative of maintaining controls would have even worse economic effects by weakening incentives to conserve and produce. Instead of being averaged and based on historical, embedded costs, electricity prices should represent the replacement costs of electricity for all customers; deregulation of electric utilities would encourage power generation from diverse sources. Faster decontrol of natural gas prices could boost gas production and would certainly reward greater conservation. Full and immediate deregulation of all categories of gas will avoid a sharp price hike in 1985 and will benefit the nation by helping to order (or reorder) investment decision with regard to new supply technologies or transmission facilities. Gas utility rates should reflect gas's economic value to consumers, and restrictions on the uses of gas should be scrapped. If a severe oil emergency arises, prices should be the essential mechanism for allocating supply.
- OSTI ID:
- 6835561
- Country of Publication:
- United States
- Language:
- English
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FUELS
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GAS UTILITIES
GASES
GOVERNMENT POLICIES
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