Oil Prices and Government Regulation

On April 20, 2020, U.S. crude oil prices plunged to negative levels. The sudden price drop generated calls for government intervention ranging from tariffs to OPEC-style production controls.

Instead, state and federal governments rejected requests to intervene in the market.

What happened next? Oil prices began to rebound. One year after the crisis, oil prices are back to normal.

Figure 1: Crude Oil Prices

A year ago, one Texas regulator derided the lack of government action: “Politics win, Texans lose.” But with the benefit of hindsight, the 2020 oil price incident shows that sometimes the best response to demands for government intervention in the marketplace is no response at all.