That's a good question. I suspect that high prices aren't the only thing that can cause a lower demand. Probably people got sick of waiting in line and they found other things to do -- like staying home instead of going to the movies.
I cannot fathom why people have such a problem with this. Isn't it logical that oil companies are going to be reluctant to sell their product at a loss? Sure, they might have access to a limited supply of cheap crude with long term contracts. But what would be their incentive to buy more expensive oil on the spot market so that the supply equals the demand?
Price controls are either mischievous or they are unnecessary. If the controlled price is above the market price it has no effect. If it is below the market price it creates shortages.
Of course I can't prove my theory is correct - although it makes sense from first principles i.e. that if you cap prices you disincentive suppliers.
But - your amazement at two branches of government working at cross purposes - surely this has happened more times than either of us can count. I have absolutely no doubt that you could have one branch of government impelmenting price controls while another branch is investigating market disruptions.
In any case if my explanation isn't the correct one then how else to explain your father's observation?