The letter "More oil drilling won't solve much" (July 25) requested the return of the insane micro-regulation of the oil industry by the Carter administration. At that time, I lived in northeast Oklahoma, and saw the chaos created by federal regulators that did not know anything about the business they were regulating.

The regulators set up areas that oil refiners could and could not market. A small refinery in Coffeyville, Kan., a few miles north of the state line, had been supplying gasoline stations in northeast Oklahoma, but the new regulations forbid a drop of gasoline from crossing the state line to their former customers. They soon had a surplus of gasoline and cut back on its production. Instead, their former customers had to be supplied from the refineries in Tulsa. They had to supply more gasoline than they could produce, so the gasoline stations ran out of gasoline for the last days of each month. Service stations on the turnpikes restricted each customer to only five gallons of gasoline.

ANOTHER REGULATION was that each refiner had to pay the same price for crude oil that they refined, and the price was recalculated each month. Those with costs below the average had to write checks to those whose costs were higher. Ashland Oil looked at these regulations and sold all their oil production, and purchased their oil on the spot market. Since they were being subsidized, they paid high prices for their oil and raised the monthly average price. Thus, the price of gasoline went up.

EVEN MORE insane was the regulation of the natural gas industry. The price set for gas was set by when the well was drilled and how deep it was. There were myriad classes, each with their own price. The price for shallow-old, old gas in Eastern Oklahoma was set at 15 cents per 1,000 cubic feet. The gas from very deep-new, new wells in western Oklahoma was $9.85. This price range of 15 cents to $9.85 was for the same thing, and the buyers had to figure out what their average price was. Needless to say, western Oklahoma had many large drilling rigs drilling for this high-priced gas. Fortunately, the state restricted them to only one well per square mile.

The Reagan administration scrapped these insane regulations, and the price of gasoline and natural gas went down.