The praxeological view. The price at the pump is information. It shows each of us how scarce fuel is relative to the demand for it, and lets us decide for ourselves which trip, or which hour of heating, is worth the cost. Not every rise, though, comes from the fuel itself: when the quantity of money grows, part of the nominal increase simply reflects the lower purchasing power of the euro. The subsidy changes neither of the two. It does not make oil any less scarce, nor the euro any more stable; it merely shifts part of the price from the driver to someone else.

The subsidy does not create a single liter of fuel. The cost of extracting it, refining it, and bringing it to the gas station stays the same; all that changes is who pays it. Whatever the driver does not pay at the pump, someone else pays. The refineries’ share is a cost too; the state’s share is paid by all of us, in one of three ways: through taxes today; through borrowing, which means taxes tomorrow; or through inflation, if the borrowing is ultimately financed with new fiat money that reduces the purchasing power of everyone who holds euros. Among those who pay is the driver himself, but also people who do not even own a car. The money taken from each of them is money they would have spent on their own ends: on food, on rent, or on savings. Now it pays for fuel, because that is what the state decided, not what they chose. What is given up is the opportunity cost of the measure, and it is printed on no gas-station receipt (the spokesman himself admitted that the room for fiscal maneuver is “limited”).

There is a second consequence. When buyers pay less than the market price, the price they see conceals scarcity instead of revealing it. At the pump, the driver sees only part of the cost and tends to consume more than he would if he saw all of it. The subsidy thus raises the quantity demanded precisely when the price was signaling the need to economize, and because it is paid per liter, every extra liter adds to the bill for everyone.

Mises, however, draws a line between a subsidy and a price ceiling. A subsidy at least does not hide the fact that someone is paying the difference. A maximum price below the market price, by contrast, drives out the marginal producers, those who produce at the highest cost and would make a loss at the capped price, and leaves less of the good available, not more. His example is milk:

“If the government wants to make it possible for poor parents to give more milk to their children, it must buy milk at the market price and sell it to those poor people with a loss at a cheaper rate; the loss may be covered from the means collected by taxation.”

So the subsidy does not make gasoline cheaper; it simply puts the difference on someone else’s bill. And every extension, instead of settling that bill, adds to it.