Looking Out From the Garage: September 2008

Gouging...?

If you are spending any time watching the news, there is agood chance you have seen that the southeast has been having some gas pains.  Lines, shortages and lots of stations with no gas.  It is a real pain in the tank...

And through it all, there is a "no gouging" law.  And I think it is time to say... out loud... so people can hear it...

It is making matters worse.

Did you catch that?  There likely wouldn't be a problem if not for the "anti-gouging" (pro-consumer?) laws.  There is another component that makes it worse... EPA formulation requirements... but the anti-gouging laws are a giant part. 

How you ask?

There are two components of supply and demand... supply... and demand.  One of these needs to be affected in order to ease the problem.  Either the supply needs to increase or the demand needs to decrease.  Both are easily accomplished with higher prices.  That's right... higher prices. 

Right now we have people waiting in lines to buy $4/gallon gas.  Some are hoarding it (you can't get a gas can at Wal-Mart anymore).  Others are filling up every day... keeping the tank full.  That doesn't help.  In fact, it increases demand.  But the price can't go up...  Price controls... No gouging.  So, that makes supply tighter. 

But, if the price spiked to $6/gallon, there would be fewer people willing to hang out in line all day to put two gallons in their tank... or fill 8 gas cans in their trunk.  People would try to "wait it out" and find some ways to save gas for a couple of weeks.  Demand would go down... and supply would remain constant... that would bring the price back down sooner. 

But wait, there is more...  If gas was $6/gallon here, and $3.50/gallon in Macon where do you think the tankers would be rolling to?  I'll wait...  So, demand goes down and the supply goes up and the prices stabilize... 

That is the market at work...

Instead, the government is trying to buck the market.  Let the demand go up... don't work to increase the supply.  The only way that price controls can work is with rationing... artificial depression of demand. 

So the final question?

Exactly what is gouging?  Is it 30 cents more than another station?  50 cents?  $1?  What is it?  And if there is a line willing to pay it, is it gouging?  Or is it the market at work?  So, the question remains... Where is the line?  And how can you tell someone that they have crossed the line when you can't tell them where the line is?

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Comment balloon 8 commentsLane Bailey • September 29 2008 09:15PM
Gouging…?
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