Thursday, September 25, 2008

The price of gas.

Here are two news stories that might interest you: Tempers flare at pumps; Easley says gas coming. from WCNC in Charlotte. And Three More NC Gas Stations Issued Subpoenas from WFMY in Greensboro.

The upshot is that Hurricane Ike disrupted the fuel delivery system that provides gasoline to North Carolina from refineries on the Gulf coast. Some gas stations, worried about their supply of gasoline, immediately raised their prices, in some cases before the storm made landfall. Other gas stations kept their prices the same, and the public, also worried about the supply of gas and expected price increases during the shortage, all filled up their vehicles. Pretty soon the stations with the original prices started running out of gas.

When Hurricane Ike was declared a disaster, North Carolina's 'Price Gouging' laws kicked in and the gas stations that raised their prices started getting subpoenas. This, of course, depressed gas prices (running out of gas and losing sales is cheaper than lawyers) and most of the rest of the stations ran out of gas, especially in Charlotte and Ashville where the supplies were particularly limited.

Since the prices were held low and gas was scarce, there was no incentive for drivers to limit their purchases. When they saw gasoline they lined up and filled up, not knowing when they would see gas for sale again since most of the stations were out. Similarly, since the price the gas distributors could get for delivery in Charlotte, where they were running out of gas, was the same as the price they got in Raleigh, where the supply held up better, there was no economic incentive to send gas there first. This isn't to say that the gas distributors are unsympathetic, only that there were gas shortages everywhere and with the pricing signals of the market muted it was difficult to prioritize.

But wait! Our beneficent Governor has acted to fix the problem. Hooray! He has gone, hat in hand, to beg the oil companies for more oil. Of course, he had to stand in a long line with other governors with equally sad stories -- and the oil distributors still have no clue where to send that next tanker.

It might seem like the whole "keep the prices low and run out of gas" thing could have been avoided but then, how would we know that our state government cares about the little guy? Besides, gasoline is too important a commodity to count on mere competition to hold down prices. It's not like there's a gas station on every corner.

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