As the price of gasoline continues its long climb, there’s a collision of ideals that interests me.
On the one hand, our nation is unabashedly energy-dependent. Our government and society are wholly reliant on ready access to large quantities of low-cost oil. It is no exaggeration to say that the government could not long function in its current form in the face of $10/gallon gasoline.
On the other hand, we proclaim the supremacy of unfettered free-market capitalism. We instinctively recoil at calls for a windfall profits tax on oil companies. Oil companies are, under their inflated prices, enjoying the largest corporate profits in the history of the world. The market is bearing the cost and, if the cost goes so high that the market won’t bear it, the cost will come down again. Or so Adam Smith tells us.
My question is this: What do economic libertarians believe is the solution to the problem of fuel prices? Would they say there is no problem? Or that if there is a problem, inevitably the market will correct itself? What if the market will bear $10/gallon oil, but our government cannot afford to participate in that market and maintain current service levels? At what point must government step in, and what would it do?