The Knoxville Sentinel reports,
Knoxville-area drivers are seeing more bags on gasoline pumps today as a petroleum shortage spreading throughout the Southeast hits local gas stations, groceries and convenience stores.
But thank goodness there is no price gouging. Russ Roberts explains where the shortage comes from.
Sep 13 2008
At lunch, Nick Schulz asked me what Robert Hall is known for. I said that Hall changed my view of macroeconomics. Even today, Hall's work influences how I think about global warming. So pull up a chair, grab a cup of your favorite beverage, and let me reminisce.Greg Mankiw has an essay called The Scientist and the E...
Sep 13 2008
Sep 12 2008
The Knoxville Sentinel reports, Knoxville-area drivers are seeing more bags on gasoline pumps today as a petroleum shortage spreading throughout the Southeast hits local gas stations, groceries and convenience stores. But thank goodness there is no price gouging. Russ Roberts explains where the shortage comes from.
READER COMMENTS
Skeptikos
Sep 12 2008 at 7:52pm
Also a lot of shortages between Katy and Tomball, TX, too. About 3/4 of the stations are out. Of course, with prices still lower than $4/gallon in this situation, who would bother to conserve gas?
AT least I wasn’t arrested by the price-gouging police when I was selling ice earlier today (it seems nearly everyone is out). Oddly, for victims of immoral price-gouging, our customers seemed very appreciative…
Matt
Sep 12 2008 at 11:26pm
My kingdom for a horse!
Dan Weber
Sep 13 2008 at 9:33am
Charlotte might be running out of gas again, too. I decided to just wait the craziness out; we’ll see if that was a smart decision or not in the next week.
Tom West
Sep 13 2008 at 11:34am
What I don’t understand is why people here that rationing the gas by price is necessarily the best plan for a business.
Certainly raising prices is the most logical plan for meeting need, but not necessarily for long term customer happiness, which is the key to staying in business.
I figure most people fall into two categories:
(1) Those who wouldn’t be willing/couldn’t afford to pay the higher price. For them, their feeling of solidarity with other suffering from the effects of the catastrophe are increased when everyone is in the same boat.
(2) Those who would pay the higher price. However, for a large majority of them, they would probably feel happier if they couldn’t buy it at all. Not being able to buy it at all is “no-one’s” fault. It’s not happy-making, but it’s not making people substantially *more* unhappy than they already are. After all, it’s a disaster.
On the other hand, those willing to pay more are probably more unhappy. The happiness caused by mitigating one of the effects of the disaster is probably outweighed by the fact they they are getting “ripped off”.
I suspect only a very few are actually happier by the sellers being rational.
I suspect economists are often unaware that in stress situations, relieving the stress on a small number often decreases the global happiness of the group. The inability to recognize this is part of why economists don’t get paid a lot of heed by the global group. (I know, this is Bryan’s complaint…)
Dan Weber
Sep 13 2008 at 11:58am
Is there a lot of customer loyalty in gas stations?
Would a customer have more loyalty towards his favorite gas station if it had low prices and a huge line, or high prices but no line?
Vincent Clement
Sep 13 2008 at 1:12pm
I would prefer if oil companies, refineries and gas stations would stop giving out reasons why prices go up and down. The general public doesn’t believe them so why bother?
Instead of complaining about non-existent price gouging, perhaps customers should think of driving less, combining several trips into one or two, buying more fuel-efficient vehicles, carpooling, moving closer to work/school, taking public transit, biking, walking, and so on. Or maybe they should cut back other expenditures?
And I really don’t care if none of the above options are available where you live. You made the choice. Don’t ask me to subsidize your lifestyle.
Ethnic Austrian
Sep 13 2008 at 1:30pm
Are there independent gas stations, independent refineries and independent middle men in Texas? If not, how would higher prices attract more supply? Big oil companies don’t have internal markets and they probably do their best to distribute gas anyway. So which additional actors are supposed to respond to incentives by high price signals in such short notice?
Price gouging wouldn’t increase supply in the region under this assumption. All it would do is to make the big oil companies a couple of additional bucks at the expense of a huge possible PR fiasco.
Dan Weber
Sep 13 2008 at 2:52pm
Probably not at all in the short-term.
However, prices held artificially low could reduce supply.
Skeptikos
Sep 14 2008 at 11:22pm
Woohoo! Electricity!
Anyway, price gouging definitely would increase the supply!
Think about people like me, who, knowing they could make some easy money, buy supplies elsewhere and sell it where it is most needed.
If I weren’t afraid of being arrested (my ice selling scheme was small and inconspicuous), I would borrow a friend’s truck, drive to a better-supplied area, fill up the back with 5 or 10 gallon containers full of gas, drive back, and sell it for 6 or 7 dollars a gallon.
I’d make pretty good money. Not only that, but the gas would be bought by those who need it most (those willing to dish out the big bucks), instead of those most willing to sit in line.
Other people would do the same (strange — it seems that people like money).
Tada! — problem solved, and FEMA hasn’t even started planning yet.
Tom West:
I think your 2) is ridiculous. Those willing to pay the higher price definitely won’t feel happier buying nothing at all — otherwise they wouldn’t buy it. (Duh.)
Let’s say you have a sick relative who desperately needs to get medical attention, which requires that you buy gas to drive her elsewhere.
Are you going to prefer that you pay higher prices and get gas, or are you going to feel so guilty that you’d rather watch her die due to lack of medical attention?
I don’t think you grasp the nature of the situation. We’re not talking about iPods or designer clothes — we’re talking about food, water — basic necessities.
If somehow you think we’re better off being artificially deprived of these, due to “customer happiness” or some kind of bourgeois guilt, you’re fucking insane. (Or fucking evil.)
Somehow, I don’t imagine you would hold that position if you knew you were going to going to lose electricity (possibly for weeks) because of a hurricane, and couldn’t find ice thanks to anti-gouging laws. I, personally, saved a few people from this (including a woman with a baby who literally could find ice nowhere else). I could have been home preparing for the hurricane; I could’ve kept all the ice for myself.
Instead I sold it.
If I had gone with your reasoning, they’d be without ice… and they’d be happier.???
Seriously, turn on the news. This stuff is happening all over the place here in Texas.
Think about what you’re saying, dude! This is real life, and people are suffering.
[Comment edited for rudeness–Econlib Ed.]
Skeptikos
Sep 14 2008 at 11:27pm
Haha, Tom (and the rest of you naysayers), probably the only reason you weren’t swarmed with personal attacks is that all the people stuck in this don’t have internet access or are too busy finding supplies to chew you out.
[Comment edited for rudeness–Econlib Ed.]
Comments are closed.