A Common Misconception – 1970s Oil Shortage And Inflation

I’ve noticed a common error.  In the 1970s, there was a gasoline shortage.  The “official excuse” is “Those Arabs were angry and the USA, and refusing to sell us oil.”  There were long lines and a gasoline shortage.

Shortages never occur in a free market.  Instead, prices rise until the shortage disappears.

Here’s what actually happened.  There was a price control on gasoline.  After the gold standard was completely abandoned, inflation skyrocketed.  However, the price control was not changed.

This naturally led to shortages.

The Arabs didn’t sell oil to the USA, because of the price control  They could get a better price elsewhere.

The price control law was repealed, and the shortages disappeared.

The “official blame” for the 1970s oil shortage is “Arab Embargo”.  That is false.  The real reason was a price control and inflation.

The “blame” for price increases is *NEVER* “inflation”.  There always is some other excuse.

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