And now natural gas?
The latest word from Energy Secretary Edwards is that the Reagan administration will not immediately seek decontrol of natural gas prices to go along with its decontrol of oil prices. Instead the Department of Energy is launching a new study of the complicated and controversial issue. This is all to the good. Unlike the oil and gasoline decontrol that Mr. Reagan could impose by executive order, natural gas decontrol depends on legislative action. And the present law for phased decontrol of gas prices required such long and difficult framing that Congress is not likely to undo it unless confronted by persuasive evidence as well as political clout.
Under the Natural Gas Policy Act of 1978 the price of gas defined as newly discovered (that is, since April, 1977) is allowed to rise gradually to a point of full decontrol in 1985. This law affects the previously uncontrolled "intrastate" gas, sold in its state of origin, as well as the "intrastate" gas sold elsewhere.
The idea was that eventually gas prices would become comparable to the price of oil. Thus they would be less linked to cost and, in effect, be based on OPEC world prices rather than the "just and reasonable" concept by which the Supreme Court ruled in favor of regulating the wellhead price of gas a quarter of a century ago. With the explosion of world oil prices the immediate decontrol of gas would cause the present wellhead price of about $1.65 for a thousand cubic feet to leap to some $4.50 to $6.50.
This means a possible doubling of gas bills for the nation's 40 million homes fueled with gas (as contrasted with only 15 million using oil), according to an estimate in the Congressional Quarterly. Under present legislation the public would not have the potential compensatory benefits of a windfall profits tax such as that which applies to the enormous added income for producers under oil decontrol -- many of them the companies that would similarly gain from gas decontrol.
To support immediate or accelerated gas decontrol, the Department of Energy study would have to find advantages to the public offsetting the obvious economic blow. It would have to say aye or nay to such facts and figures as those released last week by the consumer-oriented Energy Action Educational Foundation: that immediate decontrol would add $626 billion to the nation's gas bill between 1981 and 1985; that this would include $165 billion more for residential users, $237 billion for industrial users, $85 billion for commercial users, $119 for electrical utilities; and that for every extra dollar Americans pay in their heating bills they would be out three dollars more for price hikes in goods and services that use natural gas. Then the DOE study would have to make any case for decontrols accordingly.
Parts of the case have already been made by interested parties. Producers of natural gas argue that deregulation would spur exploration and production and prevent shortages of gas. (An article in today's Opinion and Commentary pages describes the problem of shortages.) Interstate pipeline companies argue that increased supplies might enable them to operate closer to capacity, thus lowering transport cost and reducing the impact of wellhead price increases on consumers.
According to the Harvard Business School's big energy study of 1979, higher energy prices might bring significant increases in gas discoveries but are slightly likelier to fail to stimulate more than the current rate of discoveries per year. And, as in the case of oil, it "will be a challenge" to find enough new gas reserves to keep production even up to present levels.
Senate Energy Committee chairman McClure is said not to want to take up gas pricing until 1982 at the earliest, even though he himself favors eventual decontrol. We trust the Energy Department will have its study completed well before then. If there are overriding reasons for decontrol to be found, the nation should not delay in cashing in on them.
