In recent columns I have detailed the enormous amounts of money now flowing from consumers into the primary energy industries—oil, natural gas, and coal. Scarcity rents have added two or three times the marginal cost of production to energy prices. Little of this additional cash goes to finding and producing more energy. Most of the surplus ends up as corporate salaries and dividends, stock buybacks, debt repayment, or acquisitions. The net effect is a transfer of large amounts of money from consumers to investors. In our capitalist system, resources are rationed by price. When prices rise, people with plenty of money continue to buy all they want, while people with less are forced to buy less. It’s the American Way. There is little chance that energy will become more abundant and less expensive in the future—most analysts are betting that prices will keep going higher. How long will consumers be willing to continue paying more and more? At some price, consumers will rebel, forcing politicians to step in and change the equation. One option is to reduce taxes on fuels, hoping that the move reduces prices without interfering with the flow of cash to suppliers. A more draconian option is a windfall-profits tax that returns some of the money to consumers through their government. The unthinkable (in the West) third option is to end the current system of rationing resources by price and install a system of quotas and price controls. Britain has promised angry consumers that the government will reduce taxes on petrol, but this is a short-term strategy that does not address the bigger energy picture. Windfall-profits taxes cannot be imposed on foreign suppliers. China has chosen the third option and doesn’t rely on domestic markets and market prices to ration fuel but still must pay inflated global prices for imported supplies. At what price would U.S. consumers rebel and demand action? And how would our government respond? Taxes on the oil industry and its investors have been steadily reduced in recent years with no noticeable reduction in energy prices. The nation’s highways are in miserable shape, so fuel taxes can hardly be cut. Windfall-profits taxes on U.S. companies would benefit foreign suppliers and do little to prevent further price hikes. Soon it may be time to think the unthinkable—the increasing flow of money from consumers to investors cannot be sustained for long. Energy markets have failed in the classic economic sense, allowing suppliers to collect scarcity rents. If energy prices continue to rise and consumer anger grows, the U.S. and other Western countries may have no choice but to abandon their energy market system. Price controls and allocation quotas have their own problems, of course, but they may be the only way to prevent outright rebellion.