Is charging more for gas during periods of low supply gouging?...or...Is it just the marketplace responding to signals?

Id say the later.

What if it is charging more based on a perception of limited supply? i.e. There is no way that the supply of gasoline was effected on Thursday from Ike. How about after 9/11? Seems like price gouging to me. I think a better interpretation would be how dealers were charging more than MSRP for Pontiac Solstice's when they came out due to demand outstripping demand.

It seems like gouging to me because the hikes came before any real decrease in supply. It was based on a prediction of a decrease. It's not like they're going to lower the prices drastically to make up for it if there is never a real decrease in supply.

blah Wrote:What if it is charging more based on a perception of limited supply? i.e. There is no way that the supply of gasoline was effected on Thursday from Ike. How about after 9/11? Seems like price gouging to me. I think a better interpretation would be how dealers were charging more than MSRP for Pontiac Solstice's when they came out due to demand outstripping demand.

Id say perception of limited supply "is" a market signal. The market is not always perfect...but..it does tend to shake out problems pretty well.
In fact...a dealer that chooses to price his product way out of market range, may well face ostracism later or may actually act unknowingly as a signal to the consumer to "decrease" consumption and thus increase supply in these times of shortage.

It is just a price signal. F.A. Hayek laid out this case 60 years ago in the The Use of Knowledge in Society.

I would say that a spike in demand from people filling up their cars in the event of the worse-case scenario, and the reduction in supply from the shutting down of refineries laid to the price hikes. The rise in price was telling people to use less because gas is more precious today then a few days ago. Demand shifted up and supply shifted down its that simple.

JxGx78 Wrote:It is just a price signal. F.A. Hayek laid out this case 60 years ago in the The Use of Knowledge in Society.

I would say that a spike in demand from people filling up there cars in the event of the worse-case scenario, and the reduction in supply from the shutting down of referrers laid to the price hikes. The rise in price was telling people to use less because gas is more precious today then a few days ago. Demand shifted up and supply shifted down its that simple.

There you go! +1 ...I agree totally with your assertion...and...Hayek's

You cannot seriously be okay with a $1.50/gal hike based on a false perception of gasoline shortages. This is a free market at it's worst.

no matter how you slice it $5.50 gas is gouging.

Gasoline demand is very price inelastic in the short-run (the only way to reduce demand is to drive less), and 20% of US capacity was shutdown for Ike. So we had a major reduction in the supply of a highly inelastic good, hmm what should have happened? I'm guessing a large increase in price to sufficiently reduce demand and attract new supplies to the market. What happened, a large increase in price to sufficiently reduce demand and attract new supplies to the market. Come on guys this ECON 101 stuff.

JxGx78 Wrote:Gasoline demand is very price inelastic in the short-run (the only way to reduce demand is to drive less), and 20% of US capacity was shutdown for Ike. So we had a major reduction in the supply of a highly inelastic good, hmm what should have happened? I'm guessing a large increase in price to sufficiently reduce demand and attract new supplies to the market. What happened, a large increase in price to sufficiently reduce demand and attract new supplies to the market. Come on guys this ECON 101 stuff.

Would you like to explain to me why prices in Texas only went up 5 cents, but some prices in Georgia and Tennessee went up about 30 times that amount? We're all aware of how supply and demand works, but this is not simply a supply issue. Many places saw a rise in gas prices before there could have even been a supply shortage. If this was only a supply issue, the massive spike in gas prices would have been nationwide, not just primarily in the Southeast.


There's 8/27/2008

http://www.gasbuddy.com/gb_gastemperatur...ft=A&tl=48
There's today.

perunapower Wrote:

JxGx78 Wrote:Gasoline demand is very price inelastic in the short-run (the only way to reduce demand is to drive less), and 20% of US capacity was shutdown for Ike. So we had a major reduction in the supply of a highly inelastic good, hmm what should have happened? I'm guessing a large increase in price to sufficiently reduce demand and attract new supplies to the market. What happened, a large increase in price to sufficiently reduce demand and attract new supplies to the market. Come on guys this ECON 101 stuff.

Would you like to explain to me why prices in Texas only went up 5 cents, but some prices in Georgia and Tennessee went up about 30 times that amount? We're all aware of how supply and demand works, but this is not simply a supply issue. Many places saw a rise in gas prices before there could have even been a supply shortage. If this was only a supply issue, the massive spike in gas prices would have been nationwide, not just primarily in the Southeast.


There's 8/27/2008

http://www.gasbuddy.com/gb_gastemperatur...ft=A&tl=48
There's today.

Texas is were gas is processed, and since there was a major pipeline line running through the southeast to the mid-west shutdown (more real and anticipated supply restrictions) Texas most likely doesn't have as severe shortage of gas.

As to the price going up 'before' a shortage. One way to think of prices is a rationing mechanism for goods and markets attempt to discount the future. So an anticipated shortage is just as real to the market as a real shortage. This is the same thing as a stock price moving on some news as opposed to the actual event. There was an anticipated reduced supply in a few days this make the gas currently in storage more valuable.

perunapower Wrote:You cannot seriously be okay with a $1.50/gal hike based on a false perception of gasoline shortages. This is a free market at it's worst.

If people wish to avoid this type of situation, they should do as I do. I keep my vehicles filled up during hurricane season. No panic..No problem.

JxGx78 Wrote:Gasoline demand is very price inelastic in the short-run (the only way to reduce demand is to drive less), and 20% of US capacity was shutdown for Ike. So we had a major reduction in the supply of a highly inelastic good, hmm what should have happened? I'm guessing a large increase in price to sufficiently reduce demand and attract new supplies to the market. What happened, a large increase in price to sufficiently reduce demand and attract new supplies to the market. Come on guys this ECON 101 stuff.

yes

perunapower Wrote:You cannot seriously be okay with a $1.50/gal hike based on a false perception of gasoline shortages. This is a free market at it's worst.

I never understood the "gouging" problem. If a station raises its prices unrealistically, it will simply lose business. If a customer pays that prices...then the customer is an idiot.

If stations are doing it together, such that customers have no apparent choice, then that's collusion...and that's not the free market at all.

Collusion is bad. The gouging problem isn't a problem.

DrTorch Wrote:

perunapower Wrote:You cannot seriously be okay with a $1.50/gal hike based on a false perception of gasoline shortages. This is a free market at it's worst.

I never understood the "gouging" problem. If a station raises its prices unrealistically, it will simply lose business. If a customer pays that prices...then the customer is an idiot.

If stations are doing it together, such that customers have no apparent choice, then that's collusion...and that's not the free market at all.

Collusion is bad. The gouging problem isn't a problem.

I already ostracism against local stations that have unusual high prices anyway. Dealers that choose to "jack up" prices way out of line with the rest of competition face further ostracism by consumers after the crisis is over.