I’ve been wondering for two weeks now why Sandy hasn’t driven up the price of gas. I like low gas prices. I expect them to fall lower at some point, though I may be wrong and I have no idea how to time these things. But recently I’ve found those prices disturbing because I suspected they meant pain for others.
The impending storm, the storm itself, and now the news of long lines of people—it all should have driven up the price of gas. In the St. Louis area, the price actually went down slightly as the storm was approaching. The price did not rise until after the storm was over. Now it is only fifteen cents higher. That is still very low compared the recent past.
But I see pictures of people with all the containers they can carry, in long lines to the gas pump.
Today I found the answer thanks to NPR’s Morning Edition featuring Planet Money’s Zoe Chace. She didn’t advocate for the explanation, of course, but she acknowledged what “some economists” think. The reason Sandy has barely moved the dial on gas prices is because states have anti-gouging laws. What could be more obvious? Suddenly there is a vast shortage of a product and the price of the product doesn’t change. Carter did that, and the whole nation had gas lines.
Without a free price, there is no mechanism for increasing resources to storm-struck areas. They have shortages (gas lines) and we get to keep consuming gas at a low price as if they don’t matter. Oil companies should be motivated to redirect resources to bring in supplies of gas through the routes that work and to the stations that are still open, and to repair routes (or lobby others to do it) and fix more gas stations as fast as possible. If the problem is power outages, they should be motivated to truck in generators. That costs money. The opportunity to make money would give them an incentive to work hard and fast.
In the meantime, we should not have cheap gas when others need it more. Our gas wouldn’t cost as much as what they have to pay in the storm-struck areas, but we should still be given reason to use less gas so that others can get it. If the market were allowed to function without the stupid ceiling, we would all have to conserve a bit to allow more gasoline to be brought into areas that needed it more.
Yet even in the face of shortages and people forced to stand for hours in line, we hear objections claiming that we must not “screw consumers.” But how is being forced into line and losing the possibility of getting any gas because others got there first and took it all, any less “fair” than paying a higher price. At a higher price, instead of people grabbing as much as they can whenever they can, they would take as little as possible. People would only buy gas for absolute necessities.
Of course, looking at the comments on the NPR site, one finds people who tend to comment their tend to think having political authorities ration gasoline is somehow superior than dealing with spontaneous economic forces. But how is rationing by political bosses superior than rationing by price. And once that is done, how much incentive do oil companies have to recover their markets on any kind of helpful timetable? They may want to re-open the gas stations eventually, but they won’t be nearly as motivated to hurry.
But it is not all bad news. Seeing how price controls cause shortages, and then create calls for rationing, is a good picture of what’s ahead for Obamacare.