- Posted by Christopher Estep on September 29, 2008
At 7:00 on a Friday evening, Georgia Governor Sonny Perdue signed an executive order declaring a state of emergency, specifically aimed at the then-imminent gas shortage created by Hurricane Ike. It states:
Hurricane Ike has caused a natural disaster throughout much of the Gulf Coast region, thereby adversely affecting the motor fuel supplies to the State of Georgia
This much is true. Not much to argue about there.
Price gouging related to motor fuels is detrimental to the social and economic welfare of the citizens of Georgia;
Wow, that’s a pretty broad, blanket statement. It’s also the beginning of a straw-man argument. It has made a statement with an air of authority such that it is assumed to be a foregone conclusion. It does so by using a negative term such as “gouging”. I contend that this statement is not only false, but rather is the exact opposite of the truth.
Wholesale and retail gas prices have substantially increased in some markets in recent hours
This much is true. As stated in the first part of the declaration, motor fuel supplies have been adversely affected. But again, the context implies that the increase in prices is, by definition, a bad thing. It’s actually not. It’s simple and basic economics. Supply goes down so the price goes up until the demand reduces to match supply. That’s what a free market does!
In the light of these circumstances, and to protect public health, safety and welfare, it is necessary to prevent price gouging using the authority vested in the Governor
The simple fact is that the legal prevention of so-called “price gouging” is not only unhelpful, but it exacerbates the problem and is injurious to public health, safety, and welfare.
A common phenomena that is happening here in the metro Atlanta area is that people are “topping off” their tanks, getting 4 to 8 gallons at a time whenever they see a station that has gas. All authorities, governmental and non-governmental, recognize that this is making the situation worse.
It’s common to pass 5 stations with no gas and then find a station with gas and a line of 20 cars or more. News organizations have done endless interviews with patrons who admit that they don’t need the gas at the moment, but are buying it just because it’s available and they understandably don’t want to get stuck without gasoline. The problem is that there’s no reason (other than time) not to do it.
The free market needs to be allowed to take care of the problem itself. Currently, gas is selling for around $4.19 a gallon and station owners are prohibited from making a higher profit than what they made before September 12, lest they be charged with “gouging”. The problem with this approach is that it doesn’t take into account that the gas stations are also suffering from short supply and while they may have a specific profit-per-gallon allowed, on a weekly basis they are way short and have no way to make it up.
People buy gas when they don’t need it because it doesn’t hurt enough. If the price of gas rose significantly during the shortage (as you would expect to happen in the first place), people wouldn’t be as likely to get gasoline every time it presented itself and would conserve as much as possible. The 4 gallon fillups would cease. I know personally that if I were paying $8 a gallon, I would do so gladly to fill up but I would wait as long as possible in hopes that the shortage would end. But as it stands, I will be topping off after I use up 5 gallons or so because I don’t want to risk going days without being able to get gas when I need it, which is what happened a week ago.
I was unable to locate gas without a long line when I was on empty. Why? Because people were panicking and buying gas whether it was needed or not.
The unseen danger is that of what could best be termed as “gas rage” a first cousin to “road rage”. People get very testy when they’ve been sitting in line for 25 minutes and someone cuts them off and gets ahead of them. I’ve seen it. Tempers flare and sooner or later someone’s going to get stabbed or shot or beaten down. How is that good for the public welfare?
The market needs to be allowed to discourage people from hoarding. The root problem is that price controls were put into effect when there isn’t even a shortage. Nobody has ever said that there’s a gas shortage. We have enough gas. The problem is that it’s not plentiful and abundant. A state of emergency was declared when one did not exist.
Price gouging, as they try to call it, is actually price meeting demand. It isn’t the hurricane that caused these lines, it’s the government.