The Market vs. Rationing.

[elfs]

I'm with Jane Galt on this one:

If you cap the price (as some people are making noises about), rationing will take the form of queuing: people will have to wait in long lines for gasoline. This sounds just fine to some activists and academics, apparently ones with a lot of time on their hands. The rest of us, who do not think it would be fun to live in the Soviet Union, recognize that, painful as it may be, prices are in general a better way to allocate scarce resources than lines.

But it hurts! I hear you moan. "What about my Labor Day driving?" Let me translate. What you're really saying when you say "I don't want to pay more for gas" is "I don't want to either use less gas, or use less of anything else". But as a society, we have to use less gas. You, or someone else, is going to have to consume less of the stuff, because we have less than we used to. If you don't want to be one of the people using less gas, then you have to be one of the people using less of everything else. Thus will the market pretty efficiently strip out driving by those who value it least.

But high prices don't just make people want to drive less; they make people want to supply more.

Comments

[elfs.livejournal.com]

But what is a "reasonable price?"

Take the photo I pointed you to. The guy who sells you that gasoline has to make sufficient money back on what he has in his tanks right now to make sure that he can buy more gasoline to fill them next week. If he anticipates a significant rise in the price of bulk gasoline, he needs to raise his prices right now to be prepared to buy that gasoline. If he can't, he goes out of business-- and then where will you go to get it?

[riverheart.livejournal.com]

The guy who owns a nearby gas station charges $.08 to $.09 per gallon over his wholesale cost. He's got the lowest gas prices in Port Orchard, and somehow, he's able to continue to buy gas and keep his tanks full. There is absolutely no need or excuse for price gouging.

Many of these stations aren't charging based on what they need to make to keep their tanks full; they're basing their prices on what they think the market will bear. Witness the $3.19/gallon prices all over Bellingham. Then look at the $2.60-$2.65 prices we have over here from the same big oil company. Look at the ten-cent-per-gallon higher price that a different station using the same big oil company has in town. Tell me how, when both stations buy from the same distributor for the same big oil company, and when Bellingham is a good bit closer to refineries than we are, just how these price differentials are justified?

The local station doesn't need to raise his prices right now to $4/gallon. He can do it on $2.60-ish a gallon, and I can prove it by pointing out that he's doing exactly that.

Most stations don't take fills once a week, by the way. In the case of a busy station, it's often refilled several times a day. In the case of this local one, it's about once a day. The wholesale prices go incrementally up, but they don't skyrocket overnight.

The free market is not the only or even the best solution here, especially to deal with price gouging. Laissez-faire economics will put every poor and middle-class American into dire circumstances in the next few months. A laissez-faire evacuation plan saw the poorest and most fragile of New Orleanians left to die.