Please, let gas stations ‘gouge’ away if it means we can find fuel

Fine, I’ll say it: The state’s price-gouging law is bad policy that actually makes things worse when, as now, there’s a shortage of gasoline.

A break in a crucial gas pipeline that supplies much of the fuel metro Atlanta and the entire Southeast has drivers scrambling to find a place to fill their tanks. And, in a time-honored tradition exercised by probably all of his predecessors, Gov. Nathan Deal has used Georgia’s price-gouging law to make sure service stations don’t raise their prices higher than their increased costs can justify.

The results can be found in anecdotes such as this one from an AJC story this morning:

“A QuikTrip along I-85 at Hamilton Mill Road ran dry, but customers swooped in as soon as a tanker truck pulled in with a load of regular.

“Clint Butler and Dylan Vaughan waited 10 minutes for the pumps to crank up again, hoping to fill generator tanks and the gas tank for the truck they drive for a Suwanee flooding restoration business. Their bosses, Butler said, had told them ‘to make sure we don’t get stranded somewhere.’

“They bought $32 worth and were thankful for the timing. ‘As soon as I filled up, the entire station was completely dry,’ Butler said.”

Pretty much everything that is wrong with the price-gouging law can be found in those three paragraphs.

The station “ran dry” because supply was much lower than usual due to the pipeline break. The sight of a tanker truck caused customers to “swoop in” because they know there is nothing — specifically, a higher price — to keep people from buying up all the fresh supply of gas quickly. Those people who make it to the pump in time aren’t altering their decision-making process to account for the shortage; they’re filling up everything they can bring with them to the station — and why not, given that it didn’t cost them any more than it would have on a normal day? And by the time the first wave of customers was done, the station was dry again. If you showed up, say, 30 minutes later, chances are you were out of luck.

A QuikTrip in Smyrna had bags over the pumps and no pricing on signs Monday morning. Outages were spotty across the metro area, while prices rose. (AJC Photo / John Spink)

A QuikTrip in Smyrna had bags over the pumps and no pricing on signs Monday morning. Outages were spotty across the metro area, while prices rose. (AJC Photo / John Spink)

The story doesn’t specify the per-gallon price at that QuikTrip, but based on the fact Butler filled up his truck’s tank and generator tanks and still paid only $32, I’m guessing the price was still somewhere around $2 a gallon. How much longer would the station’s fresh supply have lasted if the per-gallon price were $3? $5?

How many of those people who made it there on time would have changed their decisions if the price had been $5 a gallon? How many would have filled their tanks only halfway, or a third full, if the price had been higher? How many would have re-evaluated the necessity of some of the drives they might make in light of the higher cost of replacing the fuel they’d spend on those trips? How much gas remains unused in full tanks while other motorists are desperate to find gas anywhere because they’re riding on empty?

Price is at root nothing but a signal for people to adjust their demand according to the available supply, and vice versa. In a shortage like this one, the supply can’t be adjusted quickly, so the change needs to happen on the demand side. There is no more efficient tool for spurring such change than price. Yet, keeping prices low out of some sense of “fairness” — that’s what the price-gouging law is essentially based on — prevents that change from happening.

It is a sign of our general economic ignorance that, rather than welcoming higher prices during a shortage as a means of improving our chances of being able to find gas if we really need it, we view them suspiciously — ostensibly as some sort of greedy-capitalist way of profiteering in our time of need.

And of all markets for this suspicion to override good economics, gasoline has to be the least logical. Perhaps no other market has enough different retailers to ensure competition prevents such profiteering, allowing price to dampen demand without getting out of control. And to ensure prices fall again once supplies are back to normal.

Here, if not earlier, someone will object: “What about the poor?” Yes, what about them indeed? If you are a member of the working poor, earning an hourly wage and unable to make ends meet if you forgo any portion of it, would you rather pay $5 a gallon for a short period of time or risk running out of gas, being physically unable to make it to work and losing wages and perhaps your job? To turn a phrase against the usual mentality, the poor may be the hardest hit by this misguided “consumer protection” law.

I don’t blame Deal for invoking the law; as I said, probably every governor has succumbed to the popular pressure to do so. But the Legislature ought to take a serious look at repealing the law. If it must be replaced, we would be better served by a law that put caps on how quickly prices can rise — say, 50 percent within the first week, or some such. But rather than using an arbitrary number as in my example, any caps should be based as much as possible on observed consumer sensitivity to gas-price increases (i.e. elasticity).

Otherwise, we all know where we’ll be the next time a shortage hits: Circling around, looking for a station with gas to sell.

Reader Comments 0

180 comments
Sophiesdad
Sophiesdad

Inelastic demand curve.  'Scuse me - I misspoke.

Sophiesdad
Sophiesdad

Gas is a commodity with an inelastic price curve - we pay what they charge, because generally its not optional to, say, get to work or the grocery store.  That's what makes price gouging in the short term (and claims of 'global demand from China etc' to justify long term inflated gas company profits) so incredibly irritating..and transparent.  My advice is to buy shares of Exxon, and then at least you get some of it back in either dividends or share price gains when they report their record profits for the quarter.  You gotta play the game if u want to win...

MarkVV
MarkVV

The most telling part of Kyle’s article are the questions in the middle:

How much longer would the station’s fresh supply have lasted if the per-gallon price were $3? $5? How many of those people who made it there on time would have changed their decisions if the price had been $5 a gallon? How many would have filled their tanks only halfway, or a third full, if the price had been higher? How many would have re-evaluated the necessity of some of the drives they might make in light of the higher cost of replacing the fuel they’d spend on those trips? How much gas remains unused in full tanks while other motorists are desperate to find gas anywhere because they’re riding on empty?”

The point is, those are questions. Kyle has no answers based on facts. The implied answers are only speculations.

I do not dispute the general observation that people adjust demand depending on price. But it is at least questionable whether that works efficiently in a short-term shortage like this one. It may just as well be that most people would swallow the necessity to pay more for gas they need, and the only tangible result would be the profiteering of the gas station owners.

Lil_Barry_Bailout
Lil_Barry_Bailout

Speaking of having no answers, you haven't answered why retailers don't "profiteer" all the time.

Scamwatcher
Scamwatcher

You Athens residents have been scammed by gas stations for years. I always bypass your thieves and fill,up in Commerce or Cornelia . Clayton has a crew of gas thieves also.

Habrams01
Habrams01

Kyle, I'll add to your "hit count" so you can justify writing this opinion column, this way you can say to the AJC, "Look at me, I got all these hits".  The fact that you condone price gouging, is hilarious and sad at the same time.  You've more than qualified for a "tin foil hat" and you are welcome to it.

GeoffDawg
GeoffDawg

@Habrams01 Hey look!  Another economic illiterate.

One of the biggest failings of our primary schools, besides neglecting trade school paths, is the lack of required economic education.  It's this ignorance, that you so proudly display, that allows your political elites to keep you in the dark and submissive.

IReportYouWhine
IReportYouWhine

 With this background it is very hard for me not to support the Democratic nominee for president this year. But I believe my party has become the party of the elites and moneyed class and has deserted its historic mission as the party of the working class and disadvantaged.



Given my level of discomfort with the current leftist orientation of the Democratic Party, I am now supporting Republican nominee Donald Trump for president. I urge my fellow Democrats to vote for Mr. Trump.



http://www.wsj.com/articles/party-loyalty-cant-make-me-vote-for-clinton-1474498244



Deal with it.

Lil_Barry_Bailout
Lil_Barry_Bailout

"The law of supply and demand does not apply here due to artificial supply constraints."

-----

Sooooo...the price DIDNT go up when supply was constrained, artificially or otherwise?

Because the price going up is exactly what a basic understanding of the concept of supply and demand would tell us.

LDH2O
LDH2O

@Lil_Barry_Bailout  The price went up but that is only a small part of the law of S&D. The law says that the price going up allows competition to bring the price down but that cannot happen in a short time with artificial barriers to entry to the market. Read up on the subject.

LDH2O
LDH2O

The law of supply and demand does not apply here due to artificial supply constraints. Kyle ASSUMES that if the price is higher people will buy less and leave more for all, BUT the price has been much, much higher and purchasing was only slightly less. If the price is higher, all that means is that people with money who want to hoard can do so - there is no evidence that they would not. I am willing to consider Kyles point but only if there is data to support it.

Lil_Barry_Bailout
Lil_Barry_Bailout

If the price is higher, it also means that more costly methods of getting gas into the tanks at gas stations can be used, such as long-distance trucking.

You went to public schools and voted for Obama, didn't you?

SGTGrit
SGTGrit

@LDH2O 

Anyone else notice the contradiction in LDH20's post. LOL

Atlantarama
Atlantarama

@LDH2O Raising the price of gas in an emergency benefits the seller, as well as those who can best afford to pay more, since there's more gas for them to buy. It's the Republican way!

Lil_Barry_Bailout
Lil_Barry_Bailout

It also benefits people who really, really need gas by deterring hoarders and wastrels.

Using your feels instead of thinking--it's the Democrat way!

LDH2O
LDH2O

@Lil_Barry_Bailout  That would be the case in the long run BUT there is a limited supply of tankers and they are already tanking elsewhere. It takes time to adjust which S&D will do over the long term but not in the short term which is why artificial government control is a valid response to an artificial shortage. As to me, I worked at the Federal Reserve and know a thing or two about economics. You  on the other hand quickly reduced yourself to the level of 8-year old name calling. Not the mark of someone who is intellectually sound.


SGTGrit
SGTGrit

When will the Black Democrat leadership in our country step up and address the issue of Black male confrontations with police resulting in death or injury. First they should admonish Black demonstrators in the aftermath of an incident to wait until the facts of an investigation is made public.Rather than mounting a knee jerk protest demonstration that only invites outside agitators like those from BLM to come in they should await the facts to emerge. Unfortunately, purely for political gain those Democrat voices calling for reason are never heard.

RafeHollister
RafeHollister

@SGTGrit I'd settle for a little instruction on how to interact with the police.  Keep your hands visible,  drop your weapons, follow instructions, keep your protests verbal, and if you feel unfairly treated, file a complaint with Internal Affairs or tell the judge.  Dying to prove your point, that you are treated unfairly is not smart.

SGTGrit
SGTGrit

@RafeHollister @SGTGrit 

It appears quite likely that your last sentence describes the possible motive for some of these recent incidents. If so that's a function of extremely poor leadership from the very top. Yes, I'm talking about the Obama, White House.
 

Lil_Barry_Bailout
Lil_Barry_Bailout

When? When black lives matter more than getting Democrats elected.

MarkVV
MarkVV

@SGTGrit "First they should admonish Black demonstrators in the aftermath of an incident to wait until the facts of an investigation is made public."

Perhaps they followed the example of Donald Trump.

LDH2O
LDH2O

@SGTGrit @RafeHollister  It is quite possible the motive is police killing innocents because they can. If so that's a function of extremely poor leadership from the Right. There, my statement has as much evidence behind it as yours and is therefore just as valid

LDH2O
LDH2O

@MarkVV @SGTGrit  You mean like when he said that told a crowd that he had watched the Tulsa video, and couldn't understand why the police officer decided to shoot. So there the Republican candidate is doing what you complained that Black demonstrators are doing. You going to complain about him to? Do you have enough intellectual integrity to hold him to the same standard as demonstrators??

SGTGrit
SGTGrit

Truly amusing how the Obama economic policies have mostly benefited the wealthy and have done nothing to raise up the poor or to help the middle class. Yet we see the far-left minions complain about the nations wealth only going to the top income earners. It would be funny if it wasn't so pathetic.

RafeHollister
RafeHollister

@SGTGrit Not surprising.  Who do you see him pal around with or play golf with, the super rich.  Ever see him invite a poor person to spend the day on the course or to a State Dinner?  He vacations in Martha's Vineyard and Hawaii not Daytona or Maggie Valley.

RafeHollister
RafeHollister

@SGTGrit For the first time in like forever, Hillary is polling ahead with the wealthy, even wealthy Republicans, which usually vote GOP.  I guess they like the status quo, wouldn't you if you were wealthy.

LDH2O
LDH2O

@SGTGrit  Truly amusing how you can ignore that the unemployment rate over all job levels is down. You can have  your own opinion but not your own facts.

LDH2O
LDH2O

@RafeHollister @SGTGrit  Actually he has escaped "the White House by walking down the street, skipping town and meeting with regular Americans who have written him letters or have some connection to an issue he plans to discuss." Further did you EVER see a Republican president do what you criticize Obama for not doing? No. Your lack of intellectual integrity shows in your lack of holding both sides to the same standard.

SGTGrit
SGTGrit

@LDH2O @SGTGrit 

Well here's a fact for you if GDP hovers around 2% how can the unemployment rate be down over all job levels? Think about it, there is you know a relationship between gross national product and the rate of unemployment.

LDH2O
LDH2O

@RafeHollister @LDH2O @SGTGrit  Very good, Obama meets with vets too but SGTGrit already discounted those things by saying what Obama did was not with the ordinary people so by the same measure, it does not count for Bush either.

LDH2O
LDH2O

@SGTGrit @LDH2O  No, not really. Okun's law says that a 2% GDP = 1% drop in unemployment so the steady rise in GDP over the last few years = a steady drop in unemployment.

LDH2O
LDH2O

@RafeHollister @SGTGrit  Or are afraid of a presidential candidate with no real knowledge of governmental fiscal policy who would bankrupt the country.

Lil_Barry_Bailout
Lil_Barry_Bailout

I love the posts on economics issues--they show leftists at their most ignorant. No understanding of math, supply & demand, or human nature.

RafeHollister
RafeHollister

@Lil_Barry_Bailout Someone said something long ago that proves to be so true everyday.  That is, that the proggies don't much care about legislations effectiveness, unintended consequences or results, they just like that warm fuzzy feeling that their good intentions for the legislation were all for the benefit of mankind.

Lil_Barry_Bailout
Lil_Barry_Bailout

When your voters are as uneducated and ignorant as theirs, that often works. And free stuff works even better.

LDH2O
LDH2O

@Lil_Barry_Bailout  Sorry, but did you post any actual facts or argument with a basis show in economic theory or just spout off your opinion? Yes, the latter.

IReportYouWhine
IReportYouWhine

Yes, the libs fined Trump for flying an American flag and then told him to donate $100,000 to a veterans organization, which he did and now they whine about that -



CONWAY:  This is a classic Donald Trump.  He wanted to raise the American flag as high as he possibly could over Mar-a-Lago.  I think a lot of Americans at this point would applaud that.  And, of course, the county said he couldn't do it, it had to be smaller, so they started assessing a $1,250-a-day fine.  So the way that they, quote, settled it was for Mr. Trump to donate $100,000 to a veterans group.  I don't want that to be lost here.  I want to point out to you that the Trump Foundation has no permanent staff, no paid staff, no overhead, no one from the Trump family takes a penny as a salary or as benefits.  Contrast that to, as we know, the slush fund otherwise known as the Clinton Foundation.



http://www.rushlimbaugh.com/daily/2016/09/21/kellyanne_conway_does_it_right



Is it any wonder no one takes them seriously?

Starik
Starik

@IReportYouWhine So let's do away with all tax reductions and exemptions, business, personal and religious.

lvg
lvg

@IReportYouWhine Big difference of $885 million in tax credits and $30 million.do you know what the Times takes as a deduction???


Bigger question is whether Donald has ever paid income taxes like the rest of us? 

Do you know?do you care?


Is it gouging for him to get 150 million dollars in tax rebates for Trump Tower while earning at lest 5-10 million  a year profit  for that building and having a huge penthouse and office there? 

Until we see his 12,000 page return  all this is academic.



You poor fools are paying 500% increase to the Donald in rent so he can claim poverty  and pay no property taxes.



Donald and that Wells Fargo guy got that GOP script down real good.Greed is good.

RafeHollister
RafeHollister

@Starik @IReportYouWhine Fairtax.org


Establishment in both parties love being able to benefit their donors and punish their enemies, so although your idea is good, never happen unless the people are given some citizen initiative legislation.

SGTGrit
SGTGrit

The Federal Reserve leaves interest rates unchanged. Still no confidence in the Obama economy that remains on life support. The stock market climbs on the news and the wealthy celebrate.
 

Starik
Starik

@SGTGrit No mention of the near disaster of the bush recession?

SGTGrit
SGTGrit

@Starik @SGTGrit 

Correction on your last.....the Fannie, Freddie, investment bankers (thanks to the repeal of Glass-Steagall) and the Democrats great recession.

LDH2O
LDH2O

@SGTGrit  “Our decision does not reflect a lack of confidence in the economy,” Ms. Yellen said so I guess you ought to tell her that you know better than she does what the Fed does and means.