Wednesday, October 01, 2008

SE US Gas Shortage

A few facts from Econ 101. If there is a shortage of a good, that means the price is too low. It's simple supply and demand. You want more of a good at price X than at price X+Y, and less of a good at price X than at price X-Z. In a free market, there are no shortages ever, because as the supply of a good goes down relative to demand, the price goes up, lowering demand for that good. Higher prices further send a signal that more of that good is required, so more of that good is made. If there is in fact a shortage of a good, it will be caused by prices being artificially low. Who can make prices artificially low? Government.

So when I see reports that there is a gas shortage in the Southeastern U.S. resulting in long lines at gas stations and stations being out of fuel, I know that it is caused by government interference in the pricing system, because gas stations would be raising their prices as they ran short on gas, making fewer people buy gas due to the higher prices. The high prices would have resulted in a redirection of gas from other parts of the country, creating an equilibrium in prices nationwide after the initial disequilibrium. I don't know exactly what laws are preventing prices from rising to where they should be -- it could be price caps, or even the implementation of anti-price-gouging laws, since this has come in the wake of the last few hurricanes -- but I guarantee that it's because of some sort of stupid law on the books that some moron claimed would "help the poor." Apparently no gas at all benefits the poor more than higher gas prices.
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