Kyle Wingfield

Political commentary and opinion from The Atlanta Journal-Constitution's conservative blogger

Please, let gas stations 'gouge' away if it means we can find fuel

Fine, I'll say it: The state's price-gouging law is bad policy that actually makes things worse when, as now, there's a shortage of gasoline.

A break in a crucial gas pipeline that supplies much of the fuel metro Atlanta and the entire Southeast has drivers scrambling to find a place to fill their tanks. And, in a time-honored tradition exercised by probably all of his predecessors, Gov. Nathan Deal has used Georgia's price-gouging law to make sure service stations don't raise their prices higher than their increased costs can justify.

The results can be found in anecdotes such as this one from an AJC story this morning :

"A QuikTrip along I-85 at Hamilton Mill Road ran dry, but customers swooped in as soon as a tanker truck pulled in with a load of regular.

"Clint Butler and Dylan Vaughan waited 10 minutes for the pumps to crank up again, hoping to fill generator tanks and the gas tank for the truck they drive for a Suwanee flooding restoration business. Their bosses, Butler said, had told them 'to make sure we don't get stranded somewhere.'

"They bought $32 worth and were thankful for the timing. 'As soon as I filled up, the entire station was completely dry,' Butler said."

Pretty much everything that is wrong with the price-gouging law can be found in those three paragraphs.

The station "ran dry" because supply was much lower than usual due to the pipeline break. The sight of a tanker truck caused customers to "swoop in" because they know there is nothing -- specifically, a higher price -- to keep people from buying up all the fresh supply of gas quickly. Those people who make it to the pump in time aren't altering their decision-making process to account for the shortage; they're filling up everything they can bring with them to the station -- and why not, given that it didn't cost them any more than it would have on a normal day? And by the time the first wave of customers was done, the station was dry again. If you showed up, say, 30 minutes later, chances are you were out of luck.

The story doesn't specify the per-gallon price at that QuikTrip, but based on the fact Butler filled up his truck's tank and generator tanks and still paid only $32, I'm guessing the price was still somewhere around $2 a gallon. How much longer would the station's fresh supply have lasted if the per-gallon price were $3? $5?

How many of those people who made it there on time would have changed their decisions if the price had been $5 a gallon? How many would have filled their tanks only halfway, or a third full, if the price had been higher? How many would have re-evaluated the necessity of some of the drives they might make in light of the higher cost of replacing the fuel they'd spend on those trips? How much gas remains unused in full tanks while other motorists are desperate to find gas anywhere because they're riding on empty?

Price is at root nothing but a signal for people to adjust their demand according to the available supply, and vice versa. In a shortage like this one, the supply can't be adjusted quickly, so the change needs to happen on the demand side. There is no more efficient tool for spurring such change than price. Yet, keeping prices low out of some sense of "fairness" -- that's what the price-gouging law is essentially based on -- prevents that change from happening.

It is a sign of our general economic ignorance that, rather than welcoming higher prices during a shortage as a means of improving our chances of being able to find gas if we really need it, we view them suspiciously -- ostensibly as some sort of greedy-capitalist way of profiteering in our time of need.

And of all markets for this suspicion to override good economics, gasoline has to be the least logical. Perhaps no other market has enough different retailers to ensure competition prevents such profiteering, allowing price to dampen demand without getting out of control. And to ensure prices fall again once supplies are back to normal.

Here, if not earlier, someone will object: "What about the poor?" Yes, what about them indeed? If you are a member of the working poor, earning an hourly wage and unable to make ends meet if you forgo any portion of it, would you rather pay $5 a gallon for a short period of time or risk running out of gas, being physically unable to make it to work and losing wages and perhaps your job? To turn a phrase against the usual mentality, the poor may be the hardest hit by this misguided "consumer protection" law.

I don't blame Deal for invoking the law; as I said, probably every governor has succumbed to the popular pressure to do so. But the Legislature ought to take a serious look at repealing the law. If it must be replaced, we would be better served by a law that put caps on how quickly prices can rise -- say, 50 percent within the first week, or some such. But rather than using an arbitrary number as in my example, any caps should be based as much as possible on observed consumer sensitivity to gas-price increases (i.e. elasticity).

Otherwise, we all know where we'll be the next time a shortage hits: Circling around, looking for a station with gas to sell.

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About the Author

Kyle Wingfield joined the AJC in 2009. He is a native of Dalton and a graduate of the University of Georgia.