Many of you may not have heard that there was a gasoline pipeline rupture in Shelby, Alabama. It was the main source of fuel transportation to much of the eastern coast. It’s affected Georgia. On Sunday morning, the local Kroger parking lot was filled with cars trying to fill up for the start of the Monday workweek. Some stations ran out of gas and other stations were hit with shortages with certain fuel mixtures.
Immediately prices began to rise. It’s a basic principle of economics. Shortages of a commodity in demand will mean higher prices. If prices remain low, and gas stations have to pay a future higher price because of shortages, then they will lose money if the government steps in and demands that prices cannot rise above a certain point.
This has happened in Georgia. Gov. Nathan Deal issued an executive order prohibiting “price-gouging.” At the same time, he is telling drivers not to get gasoline of they don’t need it. What do you think works better, an admonition from the Governor not to purchase gas if you don’t need it or higher prices?
Trending: Fuel for Thought
“Finance and economics professor Mark J. Perry has a term for legislation like the executive order Gov. Nathan Deal signed Monday to keep gas stations from significantly hiking fuel prices amid temporary shortages: ‘guaranteed shortage and maximum suffering laws.’” (Source)
No one is going to starve if they have to pay double the normal rate for a fill-up. The high price will keep a good percentage of drivers away who don’t need to top off their tanks. While the price might be high for a time, at least there will be more gasoline available to people who actually need it.
A few years ago when people were fleeing a hurricane, motel owners raised their prices. They were immediately threatened with bad press and civil penalties. (Thirty-four states have anti-price-gouging laws.) Prior to the rise in price, some families were reserving more than one room. Many later escaping families could not secure a room because there weren’t any available. Raising prices might have been financially painful and uncomfortable (more people in a room), but more rooms would have been available to more travelers at the higher price.
It’s interesting that liberals have no problem price-gouging when it comes to “sin taxes.” In an attempt to cut down on the purchase of cigarettes and other tobacco products, governments have front loaded them with high taxes. For example, the federal tax rate for cigarettes went from $0.39 per pack to $1.01 per pack on April 1, 2009. New York’s per-pack tax is $4.35.
The price hike has deterred many people from continuing to smoke, dip, and chew.
If you want to stop people in an emergency from getting gasoline they don’t immediately need, let businesses raise their prices.