When oil and gas prices rise, consumers understandably look to government for relief. But history offers a warning: policies adopted in the name of fighting an energy crisis can sometimes make the problem worse, and even create expensive failures of their own.

NCEA's latest brief, U.S. Government's Action on Oil and Gas Price Crises: Help or Hindrance?, examines how policymakers have responded to energy-price shocks, from the crises of the 1970s to the current spike associated with the Iran war. Written by Peter Z. Grossman, the brief's central lesson is straightforward: emergency action may provide temporary relief, but durable energy security depends on policies that allow markets to respond and supply to expand.

The International Energy Agency's release of 400 million barrels from emergency stockpiles, for example, may temporarily reduce oil prices. But most government policy tools cannot quickly change the balance between energy supply and demand. Attempts to control prices, restrict production, or force consumers toward favored technologies generally take time to affect the market, and can produce unintended consequences.

The 1970s: A Cautionary Tale

The experience of the 1970s is especially instructive. In 1971, the Nixon administration-imposed wage-price controls across the economy to fight inflation. By the summer of 1973, those controls had been relaxed almost everywhere, except on oil. When the Arab oil embargo followed that October, price controls on oil turned a supply shock into full-blown shortages, gas lines, and market chaos that persisted for the rest of the decade. Nixon pressed ahead despite a direct warning from his own Council of Economic Advisers chairman, who said there was no more effective way to create a fuel crisis than to impose price ceilings.

The eventual removal of oil and natural-gas price controls in the 1980s and early 1990s changed that dynamic. Later embargoes and geopolitical disruptions still pushed prices higher, but they never again produced the shortages and chaos of the 1970s—because the market was allowed to respond.

The Deeper Problem: Acting Before You Understand the Cause

Crises create pressure for policymakers to “do something” before the underlying causes are fully understood. Was a price spike caused by dwindling supplies? Hostile foreign suppliers? Companies withholding production? Government restrictions? Each explanation points to a different, and often contradictory, policy response. Misidentifying the cause can push the market in exactly the wrong direction. The Powerplant and Industrial Fuel Use Act of 1978, for instance, restricted the use of natural gas in new power plants at a time when the real problem was price controls suppressing production of gas that was actually abundant. The law was repealed in 1987, once the mistake became clear.

That pattern of crisis-driven overcorrection has repeated many times, usually in the same direction: toward a government-backed technological “fix” meant to end America's energy problems for good.

• After the 1970s crises, Washington bet heavily on breeder reactors, solar heating mandates, and synthetic fuels. The synfuels program alone was authorized for $88 billion (about $345 billion in 2025 dollars); Congress ultimately appropriated $20 billion, and only about $1 billion was spent before the program was shut down. Oil prices, which the program assumed would keep climbing, collapsed in 1986 instead.

• The 2005 and 2007 energy laws bet on cellulosic ethanol, expanding biofuel mandates on the assumption that the technology would be commercially viable within about six years. Two decades later, it still wasn't, and turned out to be unnecessary anyway, because hydraulic fracturing and horizontal drilling unlocked vast domestic oil and gas supplies through market-driven innovation, not a government-designed technological fix.

As political scientist Anthony Downs reflected, the “euphoric enthusiasm” behind these grand technological fixes tends to fade fast once real costs and technical hurdles show up.

What Government Can—and Can't—Do Well

None of this means government has no role in energy markets. Strategic reserves can help manage short-term disruptions; basic research can support genuine innovation; and sound regulation can protect public safety and property rights.

But crisis-driven policies should be judged by their results, not by the urgency of the political messaging that produced them. Price controls suppress the incentives needed to produce more energy. Subsidies and mandates can lock in technologies that later prove costly or unnecessary. And large government programs built on optimistic forecasts leave taxpayers and consumers holding the bill for yesterday's assumptions.

The Case for a Longer View

Energy security requires patience that crises don't allow for. NCEA's foundational work, The Choices We Face: Energy for the 21st Century, argues that human flourishing depends on energy that is affordable, reliable, and secure; and that a diversified portfolio should include oil, natural gas, coal, nuclear power, and renewables. That principle matters most during a price spike, precisely because energy systems cannot be rebuilt overnight.

The most effective long-term response to an energy crisis is not a dramatic new program. It's maintaining a broad range of energy options, encouraging production and investment, and letting markets adapt to changing conditions rather than freezing them in place. As NCEA's brief concludes, the historical record suggests that in moments of energy-market turmoil, the most sensible policy is often to let the market sort itself out.

When prices spike, temporary measures may be appropriate. But the history of U.S. energy policy shows why policymakers should be wary of permanent interventions, rushed mandates, and technological panaceas. The best way to reduce the damage from the next crisis isn't to react more dramatically to this one—it's to build a more flexible, diverse, and resilient energy system before it arrives.

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