Who's gouging who?

Wow! I was driving home from work today and noticed that gas prices had jumped dramatically. Apparently people are panicking that Hurricane Ike will cause some serious disruptions in gasoline supplies.

North Carolina Attorney General Roy Cooper was on the news saying that gas stations will be prosecuted if they "gouge." There were people waiting in line for gas being interviewed saying that it wasn't fair that the stations were raising prices. Oh, but it's fair for you idiots to rush out suck up all the gasoline!

Here is a quote from Cooper:

"I encourage gas stations to avoid panic price increases and consumers to avoid panic fill-ups."

Words have no teeth Mr. Cooper - higher prices do. In situations like this raising prices is the best way to stop people from panicking.

What would an episode like this be without the following argument:

"That's not what they paid for it. It just seems to me they shouldn't raise (the price) until they have to pay for it"

That was someone waiting in line complaining that the station shouldn't be allowed to raise the price on gas they bought at a lower price. Oy vey! This is why a knowledge of basic economics is so important.

Stations have to make sure they have a steady supply of gasoline so that they can attract customers. If their tanks are empty they get no business (or reduced business). With the hurricane causing uncertainty around national supply chains, stations need to make sure they have some supply to last during the temporary crisis. The price they paid for a good in the past is irrelevant when it comes to decisions they need to make in the present and near future.

Phil Gramm was right for the wrong reasons - we are a nation of whiners.

Take the "gasoline shortages" quiz at CafeHayek.