Price controls
The Arab oil embargo between October 19, 1973 and March 17, 1974 is another example on how price controls cause shortages: Long lines of cars and trucks quickly appeared at retail gas stations in the U.S. and some stations closed because of a shortage of fuel at the low price set by the U.S. Cost of Living Council. The fixed price was below what the market would otherwise pay and, as a result, the inventory disappeared. It made no difference whether prices were voluntarily or involuntarily posted below the market clearing price. Scarcity resulted in either case. Price controls fail to achieve their proximate aim, which is to reduce prices paid by retail consumers, but such controls do manage to reduce supply. When price controls on gasoline were lifted, the shortage ended and the long lines of cars at gas pumps disappeared.