Price Controls in the Oil Industry

0:00Ever since about 1880, there have been predictions by so-called experts, usually technologists, that oil will disappear in 10 years. In other words, in 1890, big shots in the oil industry, technologists said oil will disappear in 10 years. And every 10 years, since then, they've been saying the same damn thing. They said that the latest big thing was very popular in the 1970s during the Carter administration, The so-called Club of Rome, which is a very high-powered group of technologists in Italy and MIT who, using high-speed computers and all that, came to the conclusion that oil would disappear by 1980 or 1984, whatever the year was. They, of course, all have egg on their faces at this point, quietly went back to the woodwork.

0:46The basic reason why they made these forecasts is that they didn't understand anything about prices and left prices out of the system. In other words, basically, it's a very simple way of doing it, but it's basically what they did, and all these guys have been doing. If you say you have 100 million barrels, let's say, of oil in the ground, excuse me, as reserves, and the consumption rate is 10 million barrels a year, Okay, then in ten years we'll run out of oil. That's essentially what they did. They didn't, you don't need computers for this. You don't need any slide rules. Okay? So in ten years the forecast, my god, is only a hundred million barrels on the ground. It's ten million barrels a year being used. Therefore, in ten years we also cut our throat. And the problem with this is, one, is these reserves are only a small fraction of the real reserves. These are only the reserves which have been mapped and surveyed and officially

1:38be there. There's an enormous amount of oil down there which hasn't been napped yet. And two is the consumption rate depends on, and also the reserves, depends on the price system. In other words, prices are always tossed out of these things. Almost no engineers or technologies understand about prices and so that gets tossed out. And what happens as you all should know by this time is if this is oil or natural gas or whatever it As the price goes up, two things happen. One, the consumers start tightening their belts because it's more costly. They start conserving, they use less of it, as we did with water last year and stuff like that. The use of something that hasn't been done was done with gasoline during the late 70s.

2:28And then, since the price is higher, there's more of an incentive to go out and look for more, and also look for alternative energy sources. In other words, since the price is now higher, it's more profitable to go out and find oil and drill it, map it, you know, all the rest of it is involved. It's not just to find oil, of course a lot of money, you have to go out and look, you have to drill, you have to employ geologists, go around, scout around and stuff like that. And it's not economic to do it at this level, let's say, this price, but it does become economic to do it up here. The result of all this is, one, the cut for consumption, two, the increased supply later on, and the price falls, and also the supplies go up. So reserves, even though we've been using a lot of oil since 1890, the total reserves on the ground now are higher than they were in 1890,

3:13because it's an expansible thing, it's not fixed in whatever it was, 100 million barrels, it keeps growing as there's more incentive to go out and look for sources. So that's the basic problem with the technologists who forecast the end of resources, they don't understand about prices. The energy crisis really begins around 1830 or 40 when whales run out. Did I cover this last time? No. Whales used to be the big energy source for lamps, whale oil, and whales began to die out. The reason why they died out was quite simple. We can call whale communism. In other words, you own, you're still through with the fish, still through with the fish in general. Whales, the communism of whales, in other words, you can kill any whale you get.

4:01If you find a whale and kill it, you own it. You can't own the whole school or whatever the technological unit is for whales. You can't say, okay, I own this little group here. If you own the whole group, that's your economic incentive. Every time you kill a whale, you're trying to replace it. In other words, grow more whales so you have a higher capital resources, your assets grow. But if nobody owns the whales in general, the school of fish or the salmon or whatever it happens to be, then the incentive is to kill the whale before the other guy kills it. There's no incentive to breed more whales because somebody else could come along and kill it. You have no property rights in the whales. Basically, what the problem is, it's a whole problem of natural resources. We'll cover, again, later on, just the natural resources. Basically, agriculture used to be in the same position as oceans are now.

4:50There's no private ownership in land. You own whatever you shoot or whatever you gather. So there's the so-called hunting and gathering society in the old days, a long time ago. So people ate, you know, they hunted deer or beaver or whatever it is, and they killed the beaver or the deer, and they owned that thing that they'd kill, but they couldn't own the whole herd. So there was beaver communism or deer communism, and the same way with gathering, they couldn't own any land, they just owned whatever seeds or nuts or whatever berries that they actually picked. Obviously this means a very low productive society. You can't sustain very many people by gathering nuts and hunting on the run. So what happened is as land got scarcer, the population grew, etc.

5:38It began to develop private property and land called agriculture. An enormous step forward which meant that people could take the land and transform it. Not just pick berries off it or pick nuts or gather nuts or whatever, they can actually transform the land and sow stuff and reap and all that sort of thing without worrying about other people coming in and grabbing it because they own this land and they own, therefore, the fruits of it. So with private property comes agriculture. In other words, agriculture is a consequence of private property rights. And this meant an enormous development of standard of living and production and everything else, because then you could take the land and transform it. You don't have to be stuck with the berries that you pick and stuff like that. You can actually grow things and produce them. produced them. Well, we're now on the ocean.

6:24We're now still in the situation of hunting and gathering. We can't own the fish that we catch, or we can't own the actual school, or the herd, or whatever you want to call it. It's technologically different for every every kind of fish, of course. It's difficult to generalize, but basically that's what we can say. To increase the productivity of the ocean is what we need, and there's private property in parts of the ocean, regardless of how this works, whether it's the school of the salmon or whatever it happens to be. and we're beginning to get that because the ocean is the next great frontier of resources we're beginning to get private property the long struggle of all the sea treaty the UN was I think properly rejected by the United States because they didn't allow for any private property in these parts of the ocean essentially the UN, world UN government commission was supposed to own everything it was a little bit of a disaster

7:16the result of this is the beginning to be private property in parts of the ocean now of course offshore oil drilling you own your platform and the stuff that you drill and the rest of it, it's offshore oil lots of that now, there's manganese nodules in the bottom of the ocean, people are getting to mine that but they can only do that if they're the rest of the insurance that the government will protect them against people coming and grabbing the manganese nodules after they start mining it, obviously, that's the equipment and so forth the beginning to have that, and this will be more and more as time goes on, this is the next Great Waves of the Future. In addition to space, there's also the oceans. The Japanese now have oyster beds systematically, not owned by private enterprise, but owned by the municipalities offshore.

8:02So this is coming in more and more. You need it more and more because you have parts of the ocean now which have lots of things to happen to it, like trawlers and drills coming in and stuff like that. Now you can't have two or three things going at once because they'll run into each other. You have to have some way of allocating the space and private property is the easiest way to do it so anyway once we get that we'll have aquaculture or aquiculture and the productivity increase will be enormous you can't believe it a fish for example in a fish situation in order to increase the productivity of fish one simple thing, a lot of things could be done, one simple thing could make an enormous difference fish unfortunately haven't read the Ten Commandments, they don't understand about fish tend to be cannibals eating even their own cousins, brothers and sisters so if you segregate fish by size, in other words, small fish in this area

8:57medium-sized fish here and large fish there, just doing that would tremendously increase the productivity of fish then you feed the fish with all sorts of guck algae or whatever, powder, whatever they eat so now you can say, how can you fence all parts of the ocean, isn't that uneconomic, you can't put barbed wire down there but now we can do it electronically very easily electronic barriers separating fish by size. That in itself would tremendously increase the fish population. There's no incentive to do that if some other guy can come along and grab them.

9:55That's even simpler than an electronic, but it could be done that way too. Sure, yeah, great. As I say, that's the wave of the future. There will be more and more of this going on. A friend of mine or an acquaintance of mine did that with turtles. See, turtles are in bad shape. I mean, they're lovable turtles. The environmentalists act as if only people kill animals. Actually, most of the animals are killed by other animals. Animals haven't read the Ten Commandments either. The animals don't respect the rights on code of other animals. The turtles are in bad shape. The turtle starts off deposited on a beach somewhere in the West Indies. And a little baby turtle, in order to save itself, has to crawl at a low speed from the back of the beach to the ocean.

10:42Once it reaches the ocean, it's safe. Then it can grow and develop. Unfortunately, a lot of predators between the beach and the ocean, little baby turtles, birds, animals, or whatever, eat the turtles, so the turtle population is an endangered species, not because of man, but because of other animals. So a friend of mine decided he was going to grow turtles, breed them, and also increase their population. So he did that. What he did is essentially save the turtles. In other words, he segregated them from the birds, whatever, and ways of guarding the turtles. The turtles then multiplied in population, he then killed some turtles and made turtle soup out of it, and exported them to the United States, but the average turtle population was much higher when he was doing it than before. So, the environmentalists, of course, say this is a terrible thing, he's destroying the turtle population, not understanding any of this stuff, not wanting to understand it, and so they prohibit it, they got the United States government being very powerful in lobbying environmentalists,

11:35got them to prohibit importation of this guy's turtles in the West Indies of the United States, and of course the United States is a major market, and this went bankrupt and the turtles are now getting extinct again, okay? So this is another example of government intervention claiming to save a turtle and actually helping to destroy them. So this is an environmentalist lobby. At any rate, and there's lots of cases like this, saving populations in order to breed them because your profit is involved in trying to maintain the turtles or seals or whatever they happen to be and keep them active, can't kill them all of course but you want to have them reproduce and all the rest of it. So at any rate, so aquaculture is going to be the next frontier, private property in various ways and parts of the ocean, it hasn't arrived yet, and in 1830 the whales were getting decimated, and so what happened was, this was the first energy crisis, the first modern energy crisis, where were we going to have any lamps, we have to go back to the cave, because whale oil lamps were the major lamp. Well as, since there was no, fortunately there was no international energy commission to solve the energy problem in the 1840s, 1830s, what simply happened was the

12:45And as the supply of oil declined, the price of oil went up, double, triple, and then people said, Jesus, it's getting very expensive, let's look around for another energy resource, another way of having lamps. In other words, the incentive was there, because the price was so high, you could go around and look for other stuff. So there was, for many centuries, this black ooze called petroleum, which was a big waste product, it was not considered a resource, it was considered a pain in the neck. Because there was nothing to do with it. It was just useless. It was just a waste. It was destroyed. There was no trees grew, it wasn't that sort of stuff. And so they began to discover, technologically, that petroleum could be used very well for lamps. Kerosene could be refined into kerosene used for lamps. They started using oil and petroleum on the surface of lakes and stuff like that. And pretty soon, of course, that got too expensive. They used up and they started drilling on the rest of the history.

13:341959 was the first oil well drill in the world in western Pennsylvania and they discovered they don't have to rely on the surface petroleum, there's lots of it underneath and that starts the whole petroleum industry and then of course very quickly they find that petroleum is better anyway and cheaper than whale oil and then of course they start using kerosene. So the first energy crisis was solved not by government planning, not by people worrying about it, writing books about it, but by simply the price going up and other people then getting and how to find some kind of alternative energy resource, which then turned out to be petroleum, which, remember, had no use before that at all for centuries. Okay, so, the, if more and more petroleum was discovered, and natural gas later, from then on, okay, it was a constant new discovery.

14:24First it was thought in the United States that Western Pennsylvania is the only place you can find oil. That's it. Standard Oil of New Jersey, which had a quote monopoly on quote, on oil refining in that period, believed in their heart and soul that only Western Pennsylvania will have oil. So when they discovered oil in Texas, when the first discoveries came in, Standard Oil said, ah, it's a flash in the pan. And then other younger companies rushed in, like Gulf and Texaco, which were originally quite small, and said, hey, no, we think this is important, we're not stuck, we don't care about Western Pennsylvania. and it turned out to be right, and this is the beginning of the end of the Standard Oil monopoly on oil refining. So, this continued, so more or less had a free market in this, in oil, until about the early 1930s, when during the Depression, oil prices were a big new increase, big new discoveries in Texas, Oklahoma, and the price of oil went down magnificently, about something like three cents a barrel.

15:18I mean, that was great. And the oil companies then put pressure on the governors of Texas and Oklahoma, You have to stop this. We have to do something to cartelize the system. In other words, once again, getting to the cartel part, going into later on, here the supply of oil has gone, has increased, means the price of oil has gotten cheaper. We have to help out the oil industry by having government in some way restrict supply and raise the price, and of course, increasing total revenue, assuming it's going to be an inelastic demand curve for the industry. and so they prevail, the oil industry prevails upon the governor of Oklahoma, the governor of Texas the governor of Oklahoma was a colorful character named Alfalfa Bill Murray and uh...

16:04and uh... the sort of people they have in Oklahoma named Alfalfa Bill and he decreed an immediate moratorium on oil, the ruling of oil making it illegal and he mobilized the National Guard and he sent troops into the oil fields to shoot anybody who was ruling oil even their own oil, not other people's oil I also thought I should be a movie man on this, it would be very colorful, you have the dead of night, you have the oil fires in the oil fields and all that and the guy in the National Guard coming in and shooting people uh... at any rate so this is a moratorium on oil production, of course the price supply goes way down, the price goes up uh... now this of course couldn't you couldn't have a permanent situation of a National Guard shooting oilmen so this is a They worked out a permanent solution to this, to have a stable, continuing, permanent cartel of oil, and it was called oil proration laws, and this was a system, by the way, which was then reinforced, first of all, every state had it, mostly Texas and Oklahoma, which was a major producing state, and California and a few others, and then the federal government in 1935 passed the Hot Oil Act, which decrees, first of all, ratified this oil production law.

17:18production agreements, oil cartel agreements, and also outlaw the shipment interstate of so-called hot oil. In other words, oil which is beyond the limited production quotas, which is more than the minimum and maximum quotas, and then making that a federal crime. So the result of all that was this fight that would force federal and state governments of forcing an oil cartel, which lasted from about 1933 to about, actually until the 70s. The way it worked, for me the most annoying part of it, well of course the system itself was monstrous, but the most annoying part was the philosophical arguments for it given by the oil industry and the guys running it, economic quote arguments unquote.

18:05They of course didn't say we want to cartelize the oil industry, it wouldn't fly in the American public. We want to restrict production, but actually what happened was every month the state regulatory Commission, and Texas for some reason is the Texas Railroad Commission, which presumably runs the Texas Railroad, regulates Texas Railroad, and also oil, it got shoved in there for some reason, and usually it was run for many years by a retired general, and the Texas Railroad Commission accesses about three people or five people, every month, like January the 1st, they would issue a quota for every oil well for the next month, for the month of January, in other words, the maximum production quota, let's say, but there'd be quota for the whole state of Texas, maximum quota, let's say, I don't know, let's say 100 million barrels, I have no idea what the number is, let's say 100 million barrels, that'd be a max, anything of, if you produce more than 100 million barrels you get shot, right, or whatever the legal

19:03fine is, the legal penalty, each oil well then gets a share of a quota, in other words, Here's an oil well which gets one-tenth of one percent of the total Texas oil, its quota is whatever this is, say 100,000 barrels for the month. If it produces more than that, the owner gets shot. In other words, it's a very rigid maximum production quota, pushing the supply curve to the left and raising the price of crude oil. This, of course, means the price of all the other oil products went up, not because the course was passed through, as I'll insist on later on, but simply because the supply is cut. This means the supply of gasoline is cut, the supply of kerosene, or whatever. So all these prices go up, so the consumer is screwed for the benefit of the oil industry as a whole in Texas, or Oklahoma, or whatever, and also against any individual competitor who would like to break through this thing and think he can do a more efficient job of

20:01Everybody is stuck with a quotas of whatever is determined by the State Railroad Commission and as I say reinforce and enforce interstate commerce by the Federal Oil Prolation Commission or whatever they call themselves. And the rationale was the Texas Railroad Commission would put out leaflets and also the oil industry and they say something like this, the oil industry in the American Petroleum Institute which is a major trade association. We're in favor of the free market. We love the free market. We're against government interference. However, in this particular case, in order to equate supply and demand, I get this, now you should know enough to realize the fallacy of this right away, in order to make, we have to equate supply and demand. In order to do it, the Texas Rail Commission has to issue a production, we have to estimate what demand will be next month, what consumer demand will be for purchase of oil, and then we will set But the official quota, so it's equalized supply and demand, because in our wisdom we

20:59know we can see what the consumers will want to buy for the whole month, and then we will regulate it. And this equates supply and demand. These same people have the nerves to say they're in favor of the free market, because what they're saying here is that, gee, demand is sort of a fixed quantity, which of course we know is nonsense, that demand depends on price. In other words, if the price is cut, maybe it might be 150 million barrels. You can't estimate how much the consumers will buy if you don't know what the price is. So the consumption varies in accordance with price, number one, the first fallacy. The second fallacy is you need some damn rural commission to figure out what the supplies are, equate supply and demand. All you need is a free price system. If the price system, moving up and down, which equates supply and demand, without any government officials claiming to estimate, trying to bring them into equality.

21:50So that's the second big fallacy. fallacy. The supply and demand are automatically equated to each other by a free movement of prices, as we all know by this time. The Railroad Commission doesn't mean they can't equate anything. They're simply assuming the supply and demand is such and such, and the supply will therefore be such and such. What they wanted was a strict supply and raised prices. That's their whole schtick. They didn't say that, of course. I don't think the public would have quite gone for it. You can't tell the public you want to cut their throat, as This is your objective. It's all for the good of the country and the public and all that. So at any rate, this system persisted, I'd say, for about 40 years. And the result was a permanent restriction on supply and a permanent rise in prices.

22:37And also over-drilling, because it meant that if you can get a drill in there, if you had this kind of situation, instead of drill a lot of oil wells and get in on a quota if you can, You have a lot of excessive number of oil wells, and each one being used only like 5% of capacity or 10% of capacity. You have a lot of uneconomic use of resources just in that sense. Too many oil wells, and each oil well being used, instead of being used to the capacity, being used like three days a month or whatever, depending on, you know, what the quota is, how much they want to jack the price up. So that was the situation. It was certainly a disgrace, especially in an industry which claimed their favor of free competition and free markets. By about the late 1950s, after about 25 years of this, they found out, it always happens with cartels, there's a hitch.

23:28The hitch is we can't shut the world out. In other words, if you take a cartel price, here's the world. World prices tend to be about the same for the same product, oil, copper, you know, they tend to be about the same throughout because you can make a profit. Profit. Copper, let's say, costs a lot more in France than it does in the United States. The incentive is to buy copper in the United States and sell it in France, thereby tending to equalize prices, unless they're, you know, government-restricted or something. But the basic tendency is toward a uniform price in each product. Well, here you have a situation from 1933 on, the price of oil, crude oil in the United States, and therefore petroleum, and therefore gasoline, all that rest of the stuff, is being is being raised way above the world market price. So instead of being just about equal or relatively roughly equal, the price of oil is now jacked up artificially by this cartel

24:20arrangement, by this government-enforced cartel. Well, the people who buy oil, like oil refineries, let's say, or utilities, whatever, consumers, get down to the ultimate, well, they'll start saying, well, Jesus, you know, the hell with domestic oil, it's too expensive, let's start Domestic oil had a built-in advantage. First of all, transportation costs are cheaper. It's cheaper to ship oil from Texas to New Jersey, let's say, with a refinery, than to ship it from Saudi Arabia in New Jersey. Second of all, American crude oil happens to be better quality than most foreign crude oil, less sanded, whatever it is. In other words, the quality is such that refineries are better able to use it. So the tendency would have been to use domestic oil. Oil. Because of this artificial cartelization, it started then being a big boom importing foreign oil. So, this begins a so-called foreign oil crisis. In other words, after about 20, 25 years of this, as more and more oil is imported because of this artificial price

25:21thing, the oil industry starts belly-yanking, especially the crude oil people. There's no monolithic oil industry, I understand. There's the crude oil people in Texas that only produce The oil refineries, the big refineries which often produce both, I mean, refine and produce crude, and others which only refine. It's a very complex industry. There's also a lot of middlemen, etc., those who transport stuff. At any rate, to make it very simple, basically what happens is that oil refineries start importing oil from foreign countries because crude oil is cheaper. So naturally, by the late 1950s, what's the response of this? The response, the rational response of this, from the point of view of the public welfare or whatever, has been to scrap the whole thing, scrap oil proration laws and allow the domestic oil price to be cheap, the falls of the foreign oil price, and then we would have stopped losing business to foreign oil producers.

26:11Of course, they didn't do that, because the step, the answer of cartellists everywhere is, keep out the foreign oil, goddammit. They don't blame themselves for making oil too expensive. They say foreigners are evil, foreign oil, bad, domestic oil, good. As a matter of fact, when Jimmy Carter went on the air for his famous energy speech in 1978 or 79, he almost said that. He held up oil as something, a symbol for whatever it was. He almost said things like foreign oil, bad, domestic oil, good. As if something about the quality of the oil here is going to be foreign. What kind of tank? Anyway, so the next step was to keep out foreign oil, as one response to that, and it was to separate the oil market, segregate it, so as to justify the rationalizing of cartel, in order to keep the cartel prices, in order to keep the competition out, say foreign oil is evil for some reason, and to keep it out.

27:04One way of doing it is by tariff sweep, you slap an extra tax, so to speak, an import tax on oil, which they're talking about doing now, by the way, right now, as we're sitting Those SOBs in Washington are saying, well, gee, you know, oil is getting cheaper. We have to do something. We have to put a big oil import tax on to raise the price so the consumers won't benefit. They don't put up those terms. That's basically it. I'm afraid we might benefit by cheaper oil. At any rate, that wouldn't have been enough. They figure a foreign oil threat, quote-unquote, is too great. Therefore, have an oil import quota. In other words, this means you put a physical maximum on an amount of oil that can be imported. You just freeze it, and just like you had the domestic oil production quota, you now have a foreign oil import quota, which is what they did in 1958.

27:49The Texas oil producers lobbied Texas, of course, a very powerful state politically and all that, et cetera, et cetera. The federal government passed the oil import agreement, which froze the, in other words, here you have oil, here's domestic oil, The supply is shifting to the left. The foreign oil then comes in and this shifts the foreign oil to the left. In other words, it throttles down the supply of foreign oil plus domestic oil and saves the cartel for a while. Now, of course, the foreign oil producers got very upset about this, obviously. What happens to the foreign oil producers, Saudi Arabia, Venezuela, whoever they happen to be, is here they had a situation, here's the price quantity, here was the demand for foreign oil was going up, mostly United States demand because American consumers and refiners were shifting to foreign oil and all of a sudden, bingo, the demand goes down again even more because of U.S. law and the United States says no, you can't import more than

29:03X amount and so all of a sudden they find their demand curve falling and the price falling on foreign oil and of course the profits going down, losses, etc., etc. So in other words, what the United States government did, they shafted two groups of People, for the benefit of the Texas oil cartelists, the American consumers, who of course found their prices going up with a supply cut, and foreign oil producers, oil producers in Arab countries and Venezuela and whatever, and Indonesia, whoever had oil, suddenly found their prices fell, the man curve fell, because of U.S. government action. As a result, a year later, 1959, the oil producing countries, in desperation, as a defensive measure, formed the famous OPEC, Organization of Petroleum Exporting Countries, as an attempt to form a cartel to do battle against the American cartel.

30:00This, of course, has been forgotten by professional anti-OPEC baiters, who claim up until very recently that OPEC is an all-powerful cartel which has set its own price of oil and is holding American consumers at ransom and putting a gun at their throats over and so on. Actually, OPEC begins as a purely defensive operation and horror at the American import quota which was levied upon them, Organization of Petroleum Exporting Countries. Also, OPEC, for a long time, couldn't do a damn thing. In other words, they formed a cartel, but they could not prevail against basic market forces, plus the American buying cartel, so to speak. And OPEC had no power whatsoever, couldn't raise the price of oil for many years. It's not as if as soon as they were formed, they then had everybody by the throat. They couldn't do a damn thing.

30:54So from 1959 up to 1973, the price of oil, if anything, fell, rather than went up. In real terms, in other words, correcting for inflation, you always have to realize that most prices are always going up because of inflation. Correcting for inflation, the price of oil fell very sharply from 1958 straight through to early 70s, 1973. It was approximately, it was probably about $2 a barrel, maybe even less than that, all this time. And a lot of that was due to the tax that the Arab countries levied on the oil firms that are actually producing the oil. So it would have been even the cost, the actual cost of oil was something like 30 cents a barrel, something like that, at the point of production in Saudi Arabia and all the other Gulf countries.

31:45What happened by the early 70s is that the Arab governments again nationalized the oil and, of course, didn't kick out the Western oil companies. They simply levied a tax. In other words, instead of owning the oil, the oil companies could then use it, but only by paying a heavy tax to the Arab governments, which raised the price of about $2 a barrel from like, you know, 30 cents a barrel. It's a big raise compared to what it is now, of course, peanuts. So, nothing really happened. OPEC had no economic power. In other words, it was not able to raise the price of crude oil on the market until the famous crisis of 1973-74, to which we now turn. The crisis is very heavily related to Nixon's famous price control, which I've where he talked about. Nixon froze prices from August 1971 until the spring of 1974.

32:53And so the prices were moralized and there was a heavy price control, one thing or another. And when the spring of 74 came along, I think I guess the 73 was the big oil crisis in the in the Middle East, I guess the last Israel War, Arab War I guess in 73, right? 72, late 72 or 73, yeah, 73, so the supplies began to be cut, and then it was an Arab oil embargo, and so you had a supply being sharply cut of oil coming in from the Middle East, which was then the major oil producing region, and this hits, ordinarily what would have happened as a result of the Arab oil embargo, and the rise in price, in other words, supply cut, the price rises, and that would be more or less the end of it. Unfortunately, this came just about at the time of the, in winter of 73-74, we still have price controls, and so, what then happened was, sudden scarcity of oil, due to the Arab

33:50embargo, the war on the Arab embargo was, reflected not so much in the rise in prices, prices were prevented from rising, but a sudden shortage developing, and the shortage could cannot be cured by prices going up because of Nixon's price control set up. And so there was the first big so-called oil shortage, a gasoline shortage of 73, 74, actually spring of 74, I guess, and it was reflected in, you know, heating oil disappeared, mowing on gasoline, everybody runs out of gasoline and so forth and so on. And to meet that, instead of allowing the price of gasoline or oil to go up, as a matter of fact, when Nixon removed price controls in the spring of 74, he kept them on oil and gas as a special bonus, special icing on the cake, because there was a shortage, right?

34:44It's a typical nonsense of bureaucrats. If there's a shortage, you have to keep the controls, not realize the controls, the shortage is caused by the controls. Notice what would have happened. Without the price controls, oil would have been scarcer. I have no question about that, because of the Arab embargo, the result would have been a higher price and no shortage. But because the price controls were on and it extended for oil and gas from then on, from then on during the 70s, this meant perpetuating the shortage and making it a real crisis. You couldn't find oil, you couldn't find heating oil, people were dying in New York because of the cold, and gasoline disappears on the highways and so forth and so on. And I think this shortage, the gasoline shortage, lasted for about two months, there were long lines, and immediately the government, in order to handle this, started off with crazy regulations, just like the water shortage.

35:36Except here they had an obvious, you don't have to install meters, all they had to do was allow the price to go up. They kept the price controls and met the shortages by the following sort of methods. First of all, establishing priorities. In other words, if there's a shortage, immediately the government steps in and decides who should be able to get the short rationing of gas, in other words. There were no ration tickets, although they started making ration tickets for the next crisis. And they said, by the way, one interesting thing, the next time we have gasoline rationing, it won't be like World War II when we were tyrannical and didn't allow people to sell their own ration tickets to other people. They'd allow a market in ration tickets, so if you don't want to use your car next week, you can sell 3 gallons or 30 gallons worth of tickets to somebody else.

36:22I couldn't call it a free market, a market in ration tickets, so-called white market, because it would have been legal. At any rate, they had all sorts of priorities set up, for example, top priorities got gasoline off the top, they were allowed to buy gasoline, others were screwed. One, government officials, naturally. Every government official is considered absolutely necessary for everything. If you're a government official, you've got an immediate priority thing, you can get gasoline at the market price. Two, of course, farmers, automatically beloved for some reason in American politics, everybody loves farmers. So farmers get the second priority, everybody else gets to scramble for it. I guess doctors on Sunday call or something, things like that.

37:07like that. Doctors on emergency. And that's about it. Everybody else has to hoof it. So and then they had other regulations, like anybody, you can only buy gasoline on the days when your license ends in an odd number, you can only buy on Monday, Wednesday, and Friday. If it ends in an even number, you can only buy on Tuesday, Thursday, and Saturday. You can't buy gasoline at all on Saturday or Sunday, except of course for doctors who can get special. I mean it's a whole network of nonsense. And fortunately, after about a month or two of this, I guess Nixon's advisor said, look, all you have to do is allow the price to go up and it'll cure the shortage. And sure enough, he did. He kept the controls, unfortunately, but he said allow the price to go up to more or less the market price.

37:54The price of gasoline in those days, before 1973, was a magnificent and lovely 30 cents a gallon. That was about it. And he allowed it to go up to about 50 cents a gallon, that was the end of it, and it cleared in the market even with the scarcity. So the hysteria was over but then of course the government starts issuing crazy, first of all they kept the controls permanently, all sorts of terrible effects we'll go through in a minute, and they kept all sorts of other regulations, and they issued all sorts of decrees to try to quote, secure the energy shortage, unquote. And this was the beginning by the way around 1974 of the unbelievably monstrous 55 mile The original rationale for the 55 mile an hour speed limit was to save gasoline, to help cure the shortage.

38:48It was then pointed out, after the thing was passed, that it didn't really save much gasoline at all. In the first place, what it did, it still does, is to waste a lot of time. truck driving from, carrying stuff from California to New York, you have to drive 55 miles an hour, you're wasting several more days' worth of cost, so the cost gets restrict supply and add on to price, obviously, compulsory inefficiencies, like a negative railroad or negative highway, like chopping up a highway, and I think you're helping out the economic situation. Secondly, it didn't really save much gas even without that because most trucks were built in those days, so their maximum gasoline efficiency was 70 miles an hour. If they'd forced to drive at 55, they were wasting more gas than they would have otherwise. The thing is still on, of course, the 55 mile an hour limit, and we'll deal with that a little bit later.

39:43It's totally crazy, and here in these highways out in the West, there's no people, there's no trees, there's no nothing. If you leave the highway, there's no difference in the The Alleged Saving and Fuel 55 mile-an-hour Limit

40:11Well, since only a third of total vehicle mileage runs on streets or roads, which you can go more than 55 miles an hour, in other words, about two-thirds is on city streets and places like that where you can't, nobody, one hopes goes 70 miles an hour. So you take that into consideration and total fuel savings, only the maximum of 2.6 percent, and then we realize that many of the trucks that I said were geared towards 70 miles an and the most efficient gear ratios and stuff like that, the saving was minimal, more than offset by the amount of time wasted, the fact that they had to spend several days more on driving, etc., etc., so then came the next rationale for keeping this thing was the alleged saving of lives, which turns out to be a lot of nonsense also.

41:01The actually, traffic deaths per, the statistic is traffic deaths per 100 million miles driven. These have been going down steadily since 1925, and nothing to do with mile an hour limits. They were essentially due to the fact that cars got safer and roads got safer. For example, this is a statistic of traffic deaths, traffic deaths per 100 million miles driven and 1925 was 19, 1935 was 15, 1945 was 10, 1960 was five, and 1973, before the fifty-five mile an hour limit, was about four.

41:58It went down later, in the seventies, to about 3.6 or something like that, but most of that has been figured out, nothing to do with the limit. First of all was a general trend, a general kind of downward trend in traffic fatalities. in the 70s, also the fact that the same reduction took place in city streets where there never had been any 70 miles an hour, there was a limit, the change of the limit in 1755 does not apply to city streets, suburbs and all that, and there was more of a reduction there than in the interstate highways, so it's figured out that most of the reduction, whatever reduction took place, there wasn't much, in other words, it went down from 4 to 3.3 or at the end of the 70s, most of that reduction was due to things like more highway, more interstate highways, quiet please, more interstate highways, most of the fatalities of traffic accidents do not take place at high speed, they take place in local streets and roads,

42:56the interstate highways are the safest place, and there were more interstate highways per local road during the 70s than before, more got built, also better tires, safety barriers, In West Germany, where there's a magnificent tradition of no speed limits at all on interstate highways. It's magnificent. As a matter of fact, when you drive on Autobahn, which is a German interstate highway, when you drive on, at 90 miles an hour, you're in a slow lane, but you're being passed very rapidly. The other car is zipping along at 100. The accidents are minimal, almost none at all. Most of the West German traffic deaths take place in local roads where there are speed limits. So, uh, huh? What? I thought it was unlimited. It's not unlimited? Huh? It's still unlimited.

43:52At any rate, the, uh, according to the traffic, uh, I had, according to the traffic experts, What reduces fatality, keeps it at the minimum, is a constant flow, constant speed, regardless of what the speed is. The real problem comes in changing speed, which of course takes place in local roads and things like that. It therefore makes no sense at all to have a uniform speed limit for the whole country. Every local condition is different, and a speed limit should be changed in accordance with a local condition, like 25 mile an hour in a school zone, and lots of other stuff, which we're used to in local roads. And so keeping the speed limit is a lot of nonsense for interstate highways on the west where there's hardly any people, hardly any cars, hardly any houses, nothing.

44:42And so anyway, this whole thing becomes absurd. By the way, on safety belts, something I should tell you about something which is being carefully kept from us by the establishment, it's true that the use of safety belts has reduced fatalities of people in cars to some extent, however, it's also increased the fatalities of pedestrians Because it's made people, drivers a little bit more reckless and so they zip around and hit pedestrians more than they did before. That's the sort of stuff the National Safety Council never tells you. Anyway, kind of might have done a study on that and it's the other side of the coin of the safety belt. To get back to the alleged energy shortage, when they allowed the price of gasoline to go up from 30 cents a gallon to about 50, the shortage was over.

45:38However, they kept the whole structure of controls, all during the 70s. They kept allocation controls and price control for crude oil and for gasoline. And they also set up a typical cartel or rationing arrangement where everybody was supposed to be supplied. If you're a gas station, let's say, you had to be supplied by your alleged employer, whatever it was, Exxon or whatever it is, by a certain quota, a minimum quota of gasoline every month. The quota was set on conditions of 1973 before the Great Crisis, and this continued all during the 1970s, this quota system. As a result, you have something like this, let's say there's a gas station in upstate New York, which in 1973 sold, I don't know, I have no idea how many gallons of gas they sell every month, let's say 2,000, right?

46:26And upstate New York, what happens of course over time, when you set the quota in the spring of 74, it makes a little bit of sense because the quota, the conditions are very similar to the base year. However, as time goes on, it always changes, especially in the United States as a fast-changing society. And over the 1970s, upstate New York begins to collapse from a not too high a level to begin with The economy begins to collapse, New England begins to collapse, and people move from New England and upstate New York to California and Texas There's been a big trend of population shift from places like upstate New York, from middle west, West Virginia, whatever, Iowa, to Texas, Oklahoma, Florida, and California Well, as a result of quotas, gas station quota in upstate New York, they might have a minimum quota of 2,000 a month, they might be only using 1,000, they have 1,000 excess gallons sitting around, which they can then return at the end of the month, let's say, to Exxon.

47:25Another thing that happens is the refineries were compelled by law, by federal regulation, to keep shipping the same amount of gasoline every month, regardless of the quality of the service of the gas station. In other words, essentially, before that, the Exxon or Mobil were employed, employers sort of speak of these franchise gas stations, they didn't shape up, there were complaints by consumers or the vice president of Exxon or something, they cracked down on the gas station. Now the federal government said, no you can't do that, regardless of what happens, you have to supply the same 2,000 gallons a month. As a result, the gas station, the individual gas station began to, the quality of service began to go down. This is very visible, the, I remember in the 70s, I asked a friend of mine who was an expert on Economics of Gas and Oil, etc., and I said, why are they not giving me any free maps anymore? I'm a big map fan. I like lots of maps. Free maps began to disappear by the mid-70s, and

48:16also the lovable washing of windshields and the general snapping of attention when you drive up, all this began to collapse, especially, of course, in New York, where they're never very lovable anyway. But they stopped washing the back of the window, all the rest of it. And so, he said, well, the thing is they have this compulsory rule now where they have to get mobile or whatever, have to supply each gas station with the same quota, the gas station comes and goes as a consumer and a mobile and they don't care anymore. So that's the beginning of the end, the cracking up, the decline in quality as a result of the price control arrangement, rationing arrangement coming in. So another thing that happens is these guys in western Massachusetts and upstate New York There was plenty of gasoline throughout the entire crisis of 1979, by the way.

49:03So, wow, they were swimming in gasoline. In the meantime, in the new areas, California, Texas, et cetera, especially California, remote from the action, there were new gas stations all the time. They couldn't get their quota. In other words, they found, here's a new gas station, but they didn't have any quota from 1973 because they weren't around in 1973. Therefore, they were screwed, very much like new people trying to find an apartment under rent control. get your quota. Many gas stations began to collapse or bankrupt, go under in California starting about 1976 or so. And by the way, the result of this, OPEX finally getting their action in here, the result of this embargo etc. was a permanent rise in oil prices which had been something like $2 a barrel for that crude oil, now went up to about $10, approximately A five-fold increase in the early 70s, and the result, by the way, of this rise in gasoline prices and oil prices began to be some kind of conservation in the sense of people beginning to cut consumption.

50:09Not much yet, but to some extent begins then, and people beginning to insulate their homes so they spend less money on fuel, oil, etc., etc. and it begins to be a slight shift to our compact car as we get more for a gallon, etc. Anyway, so California gas stations begin to collapse and then the price controls are such, after they allow the initial increase to 50 cents a gallon, they say you can't increase prices anymore, something like rent control, like vacancy decontrol, you allow an initial increase. You can only increase your gasoline prices if you justify it by, say, an increase in crude oil prices If the crude oil price goes up by 10 percent, you're allowed to increase your gasoline prices by 10 percent. However, they do not include labor costs, they do not include rent charges, that sort of stuff.

51:01So as a result, gas stations are going to go out of business in California for that reason. In other words, they're going to be losing money because they weren't allowed to increase their gasoline prices up to the free market level. And so gasoline prices went up very slowly. Remember, there was a big inflation during the late 70s, 10 percent a year, 12 percent a year. here. Gasoline prices are only allowed to go up a little bit. They went up to about 70 cents by, say, the late 70s. 60, 70 cents. So you begin to have this peculiar situation where gasoline shortages in California begin to show up, or Texas, and particularly California, but lots of surpluses here. Finally, in 1979, a second great crisis, which lasted even longer on the 1973, the Iran, I think the Iran Revolution, which was an excuse for that, cutting off of Iranian oil for a while, and so as a result of that the supply again gets cut, but we

52:06still have price controls on gasoline and oil, continuing from 1973, and so as the supply The supply gets cut again, and the price of oil now goes up, by the way, in the 1979 crisis, so about $30 a barrel, further tripling. The result of that was again a severe gasoline shortage, oil shortage, and all the rest of it. The same damn thing occurs in 1979, because the prices were kept at 70 cents, 65 cents, and whatever, a gallon. It begins in California. At the same time, New York had plenty of gasoline. California was the cutting edge of this, because they didn't have a quota. The gasoline shortage begins there in the summer of 1979 and hits here in the fall. And as it hits, the same sort of stuff begins to happen. Black markets, for example, if you're an old customer of a certain gas station, what you do is you park your car, say you use a certain garage, gas station, you park your car at night, in the morning you get

53:02there and you find that magically the tank is now filled, even though it's a big rationing. That's if you're an old and valued customer. If you're not an oligarch, then you need to whistle for it. So favoritism begins to come in, the old customer bit, black market charges. Also, in California, the gas station is closing and they don't have any gasoline. Also, big lines. Long lines. First, in California, everybody has to ride a car. There's buses and that sort of stuff, or subways. So you're there, you have to get to work, and there are 50 cars lined up, and the lines are very slow and so forth, and a lot of hysteria begins to develop. First of all, somebody wants to cut in. Cutting in line in this kind of situation causes all sorts of fights. You go out and punch out the guys trying to cut in, murders even took place on the gas line.

53:47Social conflict emerges. And general hatred of the gasoline station, hatred of your fellow comrades trying to get gasoline, and all the rest of it. And also crazy regulations come in. Once again, rationing was decreed by the federal government, top priority, government officials. and we've always had plenty of gasoline, second priority farmers, I guess the same thing, third priority surgeons, doctors paying emergency calls on Sundays. So again you have the same odd even license plate regulations, even more so than before, because this lasts about six months, at least in California. It lasted much longer than the other 73 crises. and situations such as upstate New York and western New England, plenty of gasoline, never had any shortage, they were swimming in it but they had a quota, the companies had to send them the oil by federal mandate in California they were closing up and after a few months New York City had the same problem so once again, what to do about it, big crisis, etc. etc.

54:55Carter goes on the air. Carter had a big crisis. He had a big energy problem. What to do about all this? He scheduled a big TV speech on energy for a certain night. He had everybody alerted. Suddenly, he canceled it an hour before. He said he had to rethink everything. This was the beginning of the view that Carter was a nut. which took hold to that point and continues ever since and he went up to the mountaintop and literally I think he went to camp there and he communed with all the big shots, he communed with John Kenneth Galbraith, he communed with everybody, philosophers and he came back with his famous moral crisis speech, moral malaise I guess it is, America's suffering from moral malaise, it didn't go over very well either. At any rate, the, well apparently what happened was the inside dope on that was his, his two big economists, Secretary of Treasury, Blumenfall, who was one of the big economic advisors, Secretary of Energy, Schlesinger,

55:54who had been an economist originally, had been hip-deep in this whole control system, all in favor of it, finally came to conclusion the only thing to do was to appeal, scrap the whole thing and go back to the free market. That was their recommendation. Apparently Carter was going to do it, which would have ended the whole crisis right then. Unfortunately, as Georgia crony said, you can't do that, you look like a weak president. Only weak Presidents, repeal, control, strong presidents, impose control. So purely for political reasons he shifted the whole thing and came up with the famous energy package, which just made things worse. We'll go into a little bit of that because there are all sorts of interesting ramifications of this oil stuff. At any rate, what finally happened in the beginning, they'd be ads in the paper, which gas stations that have gas today, that sort of stuff, you know, 5 or 6 or 7 or whatever. They have them only from 9 in the morning to 11 in the morning.

56:47They're very scarce. I'm just in long lines trying to get it. So one heroic gas station illegally said, okay, we have plenty of gasoline. We're charging, however, a buck a gallon. So the traditional customary and lovable 70 cents. And they broke the tidal wave. They had plenty of gasoline, 24 hours a day. Yes, sir. Back to service. Back to no lines. And And this magical thing paves the way and then they all broke it. All the gas stations in the area started charging a buck a gallon, plenty of gasoline. That, I think, blazed the path for the government to start saying, okay, they finally scrapped and for lots of headaches, lots of recriminations, they finally scrapped the price control, at least the extent of allowing it to go up once again to about a buck a gallon, buck ten, and that was the end of the gasoline shortage for 79.

57:33It took longer for this to sink in because the Carter administration was more resistant The Nixon administration had been through a little bit of enlightenment, so to speak, but at any rate, that was the upshot. There were a lot of other, however, continued on, a lot of other ramifications here, because in addition to this oil problem, there's also a natural gas crisis brought about by very different elements, reinforcing the whole 79 problem. Natural gas is a competitor, of course, with oil, for energy, as is coal. There was also a coal problem, and natural gas is a complicated, it's transported by pipeline, and the federal government starts regulating pipelines very early.

58:19At any rate, in 1954, I think it is, the Supreme Court tells the Federal Power Commission, which in those days was regulating the price of natural gas, that they had to regulate it, the Federal Power Commission didn't want to regulate it. by the Eisenhower administration and more free market oriented. The three courts said, no, you have to regulate it, and then they wind up, in the late 50s, they freeze the price of natural gas at 1956 or whatever prices, and they kept it that way from then on until the late 70s. As a matter of fact, maybe the early 80s, so the price of natural gas was frozen at the old 1956 level. Now, of course, what had then happened is you could tell what happened, first nothing happens because it's a regular price, but then as the inflation proceeds, the level of the 1956 price becomes ridiculous and becomes more and more under the, below the free market level.

59:11So here you have a situation where you have natural gas and the price is frozen at the late 50s level, the price keeps going up because of inflation, and you wind up with increasing Changing Shortages And the price becomes more and more unrealistic. The natural gas takes a few years to change prices because the way the industry runs is there are long-term contracts. The pipeline makes a long-term contract with the producer, so it takes about three or four years for a price to change. It's like a long-term lease. But after a while, I began to realize there was a shortage. In the meantime, before the shortage developed, natural gas looks like a big, hey, let's get natural gas. It's much cheaper than oil now because natural gas price is frozen. So public utilities in the Northeast and other regular homes and businesses start shifting from oil and natural gas, and particularly from coal and natural gas, by the way.

1:00:03So natural gas becomes artificially cheap, and people, of course, find a lot more of it, and that's the result of increasing the shortage, which begins to develop by about the early 70s, and so it gets bigger and bigger, of course, and as natural gas gets, the shortage When the shortage gets worse and worse, people stop looking for it. The price is too cheap. There's no reason to look for more natural gas. The supply starts going down, which makes the shortage even worse. So, what finally begins to happen on the natural gas front, about the same time as the oil crisis, once again, the authorities understand the incentive effect. They don't understand the rationing effect. They start an incredible, crazy quill of natural gas regulation, much of which still exists now, by the way.

1:00:49it's a little bit better but they say okay we want more we realize that the supply of natural gas is falling off so what we'll do is we'll allow a higher price more or less a free market price let's see it's up here for new oil but old oil has to come in at the cheap price the old the level of old price in 1954 so they set up a whole insane system of price regulation where we're usually of course new gas and old gas are the same the same gas it's the same you have the I have a whole patchwork of controls for the new gas, whatever it is, per cubic foot, and old gas is much cheaper, etc. You have a whole structure, an insane price structure imposed by the government. Well, what happens, of course, is you have an old gas well. What are you going to do? You're not going to keep producing an old gas well at half the price you can get for a new gas.

1:02:05In Texas, within Texas and Oklahoma, which are the major natural gas producers, they have a free market price for natural gas, whereas in New York or Michigan or something, they have a free market price for natural gas.

1:02:35They still have the old control price, like so, and so, as a result, the price of natural gas in Texas is like three times the amount as it was in Michigan. Usually, of course, the price of Michigan is higher because it costs some money to ship the gas from Texas to Michigan. So, usually, the price of natural gas in Michigan, say, price of natural gas, Michigan, equals the price of natural gas in Texas, plus the cost of shipping natural gas from Texas to Michigan. So, usually the price in Michigan is higher than the price in Texas, okay?

1:03:22And because of this crazy situation of the price control interstate, but not intrastate, you wind up with three times, something like a dollar per cubic foot or whatever, I guess 30 cents, three times the amount in Texas. As a result, Texas had plenty of natural gas and Michigan had not. Who in here, a Texas natural gas producer, are you going to sell to other people in Texas for three times the amount or sell it to somebody in Michigan for one-third of the amount? Obviously, the answer is obvious. As a result, there was There's never any natural gas shortage in Texas or Oklahoma, but there's lots of shortages outside. It's a little nutty situation. So the Carter administration tried to cure that by saying that old gas, new gas didn't work, and slapping on controls in Texas, which didn't help much either. It simply created a shortage in Texas, didn't relieve the shortage in Michigan or New York or whatever.

1:04:11So anyway, natural gas is still a problem. It's been alleviated somewhat. In the Carter package, in addition to other nutty things that are going into the next time, he said, okay, we will eliminate all price controls and allocation controls, all these federal controls on crude oil and on gasoline and on heating oil, as of September 1981. I think this passed in 1979, or 80, this was the Carter energy package. So, in other words, he said, okay, in September 1981, we will eliminate these controls, phase-out. Natural gas, he didn't do anything about, and when Reagan came in, the first thing that Reagan did, the first week in office, it was Reagan's free market week, and the first thing he did was eliminate oil price controls and allocations as of January, as soon as he came in.

1:05:06So, what he did was he simply advanced the date from September to January. He didn't deregulate any more than Carter would have, except that Carter would have taken nine more months or whatever it is. At any rate, so he immediately eliminated oil price controls and allocation controls, rationing controls on oil, petroleum products and petroleum. And the result was, you're keeping it below the free market price. The result was, which could have been predicted by the fact that I did predict it in economics, you know, 251, But you're keeping it below the market price, initially there's an increase in price for about a week or two weeks, then bingo, because you now have a free market, there's no problem about shortages, immediately people start finding more and more oil, producing more and more oil, and the result was a decline in price, which continues to this day, matter of fact it was the beginning of the great price decline, started immediately after the elimination of the price control.

1:05:56So here, most people are predicting, hey, it's going to be terrible, oil prices will will double, will triple, from $30 a barrel except in whatever the consequences in gasoline and fuel are. Just the opposite happens. This is the beginning of the great turn down. As soon as Reagan eliminated the price controls on oil and gasoline and the rest of it, the price started going down, both in gasoline and in crude oil. So it was $30 a barrel at that point, it's now down, it's magnificent now by the way, it's now down about $15, I think, and dropping continually. So this is the beginning of the breaking of the OPEC cartel, the elimination of the price control. The rise in price was very short and as soon as the free market, they realized the free market was developing, oil started pouring in from everywhere.

1:06:43Another thing that happened to OPEC was that as a result of the OPEC driving the price up to $30 a barrel, other countries began to look for oil, not just OPEC countries. So you have a big shift in proportion. One of the reasons why the OPEC cartel has now collapsed is most oil is now being produced by non-OPEC countries, Great Britain, the North Sea oil thing, Mexico, various countries that are outside the cartel, because therefore it didn't restrict their production. In other words, Saudi Arabia and the other OPEC countries are constantly keeping, restricting production so they can keep the price up. These other countries are not far off, they don't care, they're taking advantage, they're busting the cartel, they're cartel busters that come in and they lower the, they don't have to limit their production, they just lower the price. And the result of that is the smashing of an OPEC cartel at long last, and a friend And by the way, the same people who have been belly-aching for 10 years or more, that the OPEC was holding us all by the throat, creating inflation and all that, these same people are now belly-aching as their terrible thing, price of oil is falling, and it can't be a terrible thing to rise and also to fall. There's something very odd about this. Actually, we should all welcome price falls at all times. It should be if it goes down to zero, it's even better.

1:07:56Thank you for watching!