ATLANTA --- Laws prohibiting gas retailers from exorbitantly raising prices after hurricanes disrupt supplies are supposed to help hold fuel costs in check.
But as fuel supplies neared empty recently, a theory emerged suggesting the laws might keep drivers from finding gas.
"You do exacerbate the shortage. You don't solve things, you make it worse," said David Mustard, an associate professor of economics at the University of Georgia.
Fuel retailers and representatives for Gov. Sonny Perdue, who enacted the statute after hurricanes Gustav and Ike kinked fuel production in the Gulf of Mexico, dispute the theory. The statute prohibits retailers from increasing their margin of profit on gas sales. More than 100 stations are being investigated for possible gouging.
Mr. Mustard said anti-gouging statutes can exacerbate a gas shortage because price -- the factor that would normally keep balance between supply and demand -- is disrupted.
A noticeable increase in gas prices essentially tells consumers to buy less gas, Mr. Mustard said.
At the same time, it tells producers to send more gas to the high-price area to maximize profits. When people buy less gas, the price tends to fall and producers might level off deliveries.
But when the price is artificially kept in check by law, motorists don't get the signal to buy less, the professor explained.
Their purchases, catalyzed by fear of an empty tank as pumps go dry, drain supplies, and constrained prices can remove the incentive for producers to replenish them, Mr. Mustard said.
Perdue spokesman Bert Brantley said no evidence suggests retailers didn't get more fuel because prices were under control. He said the statute prevented dramatic price jumps that could have wreaked financial havoc.
Reach Jake Armstrong at (404) 589-8424 or jake.armstrong@morris.com.
Comments
The law doesn't keep the service stations from raising the price a little. Also there are other ways to check people overbuying - limit the amount etc.. The law also keeps people from coming in and selling building supplies, water and food at really high prices. I guess we should let folks sell plywood for $50 a sheet to a person who HAS to patch the hoie in the side of his house. Or water for $5.00 a bottle to the person who have to have it.
But he is a professor of economics at the University of Georgia.
All the gas stations had to do during this shortage was require a maximum of $15-$20 worth of gas for cars and $25-$35 worth for trucks and SUV's. That prevents gouging and keeps the pumps running for as long as possible. Some stations did that; thanks very much, honest station owners. Others did not and made the problems worse.
I topped my tank off every time it got down between three quarters and half. I couldn't afford to take a chance on not having gas to get to work. I normally don't let it get below a half anyway. I didn't use any more gas keeping it topped off than I would have if I had let it get close to empty and then just bought a half tank. I don't know why people want to let it get close to empty and then panic if they can't find gas.
This is what happens when the government controls the free market, as our government starts to take over and control more businesses that are in trouble. Expect to see empty groceries store shelves and only 1 of 5 grocery stores with groceries to sell as the socialist democrats take over our government. Government controls don’t work as well as the free market. That is why communism fell in Russia -- now the American people want CHANGE – they want government control of the market and health care.
Amen, BTurner. It amazes me why people can't exercise a little common sense and STOP wanting a law for this and a law for that. Everytime government ACTS, ENACTS or IMPLEMENTS some piece of bull crap legislation we lose a little more of our freedom. It's a no brainer about the gas situation, topping off is the way to go all of the time, it leaves more gas at the stations, takes less time to pump it and better gas mileage to boot.
It is the so-called free-market system that has just about eliminated the American middle class, strengthened the upper class, and made paupers of majority remaining. We need more regulation to control business, and most of all, big business; the present banking fiasco and "bailout/rescue" crisis, and the relatively recent Enron bust are just two examples of big business free-market practices gone amok.
GGpap, "the present banking fiasco and 'bailout/rescue' crisis" was not caused by the free-market. It was caused by government intervention in the free-market. The Clinton administration decided that it would be a good idea to provide mortgages to people that could not it. Once these people could not continue to make their mortgage payments, the banks were left with all this bad debt. Do some research!!
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