Romania has vast energy resources but the state does not allow their exploitation, says Cristian Popa, member of the Board of Directors of the National Bank of Romania (BNR), in his article “In defense of markets”.

He considers it ironic and sad that, on the one hand, the price of gas has exploded, but on the other hand, the state does not create the legal and fiscal framework for the exploitation of offshore gas in the Black Sea.

“Let the State intervene!” it is heard more and more often in the public space.

“These are extraordinary conditions!”, “Let the state cap the prices!” other voices respond, with even more enthusiasm.

There are three recent developments that have caught my attention, with the help of which we can easily demonstrate, in an easy way, why voices are wrong, and why statist intervention itself is the source, not the solution, of problems.

I approach them below, point by point.

The “invisible hand” of free markets, the one that aligns demand with supply, works forever and acts on millions of products through billions of transactions, setting things up like no central planner (or bureaucrat, or leader, or dictator, or the most powerful computer / artificial intelligence) cannot do it.

The Austrian School of Economic Thought tells us that markets do this with the help of spontaneous order, because it is formed spontaneously, continuously, through the voluntary interaction of billions of individuals, sellers or buyers, with different priorities, preferences, resources and technological possibilities. for some to coordinate with each other, in a way that is as dispersed as possible, and without the intervention of a central entity to coordinate the process.

A free market will continuously seek to identify and satisfy in the best way the desires of consumers, and through competition and the incentive system will seek to offer the best products at the best prices “, writes Cristian Popa.

The price explosion: has the closure of the mines not contributed to the current crisis?

Regarding gas and electricity prices, Popa mentions that they have exploded in Europe, and not only, amid high demand due to the return of consumption and reduced supply.

The solution proposed by the statisticians is the capping of prices by law, so “let the State solve it!”, As if more gas and more electricity will appear out of nowhere.

But the laws of economics work independently of the laws given in Parliament. The capped prices would discourage investment in production capacity, not the other way around, so it would not solve the basic problem, it would be a sedative that would not cure the disease.

What statisticians do not tell us is that, although we look to the state for solutions, it is very possible that the state itself generated the problems in the first phase.

Has the closure of coal mines and power plants not contributed to the current crisis of the energy prices we are in?

Really introduction of the CO2 certificate system did it not lead to increased costs, the closure and bankruptcy of some coal-fired power plants and thus to higher prices?

Reducing pollution and greening the energy system is probably necessary, but something needs to be replaced with something else, only elimination leads to shortages, the elimination of an energy source must be accompanied by the development of new ones, and this using also competitive market mechanisms. to unintended consequences, such as power outages or huge prices “, says Cristian Popa.

According to the author, the state, trying to solve one problem, caused another, or even more, probably unintentionally.

Romania, vast resources

“Another situation, this time specific to our country, is that although we have vast energy resources in Romania, the State does not allow their exploitation. It is ironic and sad that on the one hand the price of gas has exploded, but on the other hand the state does not create the legal and fiscal framework for the exploitation of offshore gases in the Black Sea, so it does not allow private companies to exploit these gases.

But, at the same time, the State offers itself, willingly, to cap the prices, or to subsidize them, with money from the taxes collected… also from us. And we are left wondering why prices are rising.

Can we afford to leave these billions of euros of untapped mineral resources under the Black Sea? Is Romania so rich as to import gas rather than exploit its own?

In the winter, when it will be cold, or when the bills will come, we will probably think longingly about those gases.“, Claims Cristian Popa.

source: Agerpres

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