ABSTRACT
This chapter describes the basic energy problems and analyzes the economic, political, social, and security difficulties related to them. It deals with an examination of our counterproductive energy policies and suggests guidelines for formulating healthier policy. Domestic costs have also increased because of energy restrictions motivated by environmental concerns. Energy price increases will also induce early obsolescence of the capital stock. Energy price increases have redistributed wealth within the United States. Price controls also consistently exacerbate our energy problems. Understanding energy problems and their consequences, along with understanding our self-imposed problems, leads to a framework for formulating more appropriate energy policies. Oil and gas price decontrol is a necessary foundation for sensible energy policy, but it is only the first step. Costs of environmental damage associated with energy production and use are also not included in market prices. Bringing energy prices into line with marginal costs would require large energy taxes which will raise revenue.
