We’re going out of town this weekend, so this morning on my way to work I filled up our vehicle, just in case prices went up before we made it to Pontotoc, where we usually fill up on cheap gas. When I was out for lunch prices hadn’t gone up here in Oxford. However, I’m hearing rumors of $5/gallon gas in neighboring states.
It’ll be interesting to see what happens. Lots of drilling and refining operations in Texas and Louisiana are shutting down in preparation for Hurricane Ike. I’ve heard that the wholesale price of gasoline went up $1.50/gallon today and that some stations had stopped delivery of gasoline until they saw what the market could bear.
Most people look at “price gouging” in a negative light. However, most free market economists argue that raising prices during an emergency is a way of efficiently distributing scarce resources. For instance, if gas stations in areas impacted by the hurricane leave their prices at current levels, most people will fill up their tanks whether they need it or not, just in case (thus the lines), and could cause the gas station to run out of gas. If gas stations raise prices to reflect its scarcity, only those that really need the gas will buy it.
Laws against raising prices during an emergency also reduce any incentive a vendor might have to prepare for the emergency by stocking up or going to extraordinary lengths to bring more of a scarce item into an impacted area.
I don’t think the government should restrict prices during an emergency. On the other hand, vendors that raise prices during an emergency will have to deal with the wrath of the community after the emergency is over, whether there is a law against raising prices or not. The general public doesn’t have a good understanding of economics, and probably wouldn’t care if they did.