Hurricanes Do Not Cause Shortages
But panic buying does (especially if prices are not allowed to rise due to "price gouging" laws).
And price controls do (previous CD post).
HT: Ryan Fulkerson
CARPE DIEM
Professor Mark J. Perry's Blog for Economics and Finance
Sunday, September 21, 2008
But panic buying does (especially if prices are not allowed to rise due to "price gouging" laws).
And price controls do (previous CD post).
HT: Ryan Fulkerson
About Me
- Name: Mark J. Perry
- Location: Washington, D.C., United States
Dr. Mark J. Perry is a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan. Perry holds two graduate degrees in economics (M.A. and Ph.D.) from George Mason University near Washington, D.C. In addition, he holds an MBA degree in finance from the Curtis L. Carlson School of Management at the University of Minnesota. In addition to a faculty appointment at the University of Michigan-Flint, Perry is also a visiting scholar at The American Enterprise Institute in Washington, D.C.
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7 Comments:
Funny how Reuters doesn't agree (hint: pay close attention to the last word in paragraph 1). The argument continues to go, "price it right and the demand will match supply." True, to *some* extent, but gasoline demand is generally considered inelastic. Yes, you'll curb demand on discretionary driving, but how much of that has been moderated already, as we've seen from month after month of Mastercard reports?
You know those people who clean up the toilet bowl and pick up the garbage after you at the University? If and when a real national shortage hits, it will be hard, and those 'market forces' that you love so much will make gasoline so expensive that those janitors won't bother to come clean up after you; they can't afford it. But yeah, that *will* fix the so-called 'shortage' problem, as long as you accept you'll price 50% of people out of their current job-commute situation. And you can keep right on coming to work (it just won't be as nice or smell as good).
You assume there is extra gasoline that can be brought to market and keep prices stabilized, and that's not the case. There's not a lot more finished product imports to be had in addition to what we get now, AFAIK. Take a look at EIA's Petrol Navigator if you don't buy it. Now we do have some idle domestic refineries, but there's questions on how fast those can be supplied and brought online. So from all practical senses of the word, there is a shortage of capacity right now, and we'll see how that affects the supply in the next few months.
Look at the picture and you can see that after Katrina/Rita, there was a dramatic lack in supply to bring to market, regardless of price.
Why don't you actually read a little more about the fundamental supply and demand dynamics of the market you are talking about, particularly the supply outlook right now, or do we really want to just continue the idea that your ideology is the right solution for every problem 100% of the time?
Maybe you should change the name of your blog to: Carpe Diem: quam minimum credula Mark Perry.
As I commented before,
hurricanes don't cause shortages, but they do drive prices to the price gouging ceiling all along the I75 corridor from kentucky to ann arbor.
Hurricanes take refineries and oil rigs offline....who knew?
"If the pattern in Louisiana holds in Texas, it may take as much as 20days after Hurricane Ike before all of the production is back on line. It will certainly be at least 10 days."
From your own link, 10-20 days is a short run supply problem not a long term one. In the short run, it helps to have price signals which encourage supplies from other states and discourage panic buying.
Keeping prices artificially low means that it is too expensive to source gas from out of state which tends to exacerbate local supply problems.
Demand patterns fundamentally change after a hurricane. Discretionary driving is not the focus....gas/propane is what you need to run your chainsaw, generator, barbecue, stove. Most of the schools and many businesses are closed so there aren't too many people commuting. It is very tempting for people to hoard water, food, and fuel at these times which tends to exacerbate supply problems. With downed power lines and trees, most people are staying close to home and working on trying to clean up their yards.
Frankly, there is a far greater problem with the electrical grid in Texas. Thousands of electrical technicians from all over the U.S. as well as Canada are working to try to restore the grid and clear downed trees. These efforts will likely take far longer than 10-20 days.
> Funny how Reuters doesn't agree
Yeah, Reuters. I trust THEM for news, ya, ya!.
:-/
This is the Reuters which has been repeatedly demonstrated to accept photoshop pictures on multiple occasions, in at least once instance well AFTER being publicly called on it the first time?
This would be the Reuters which openly acked that it was allowing Saddam to give them propaganda in the place of news when he threatened to cut them off from being able to send reporters into Iraq?
THAT Reuters?
ANNK. Thanks for playing. You lack the skill to properly vet your sources of information and recognize reliable vs. unreliable sources.
Reuters...
...reliable vs. unreliable sources.
That's why I consider those who pressured for their capitulation as unreliable.
This is the Reuters which has been repeatedly capitulated to a set of bloggers with an axe to grind.
Corrected that for you, OBH.
anon @ 11:59 AM says: "Funny how Reuters doesn't agree"...
Funny how you pick one the very
questionable MSM sources but then again it already agrees with your narrative...
"Maybe you should change the name of your blog to: Carpe Diem: quam minimum credula Mark Perry"...
Hmmm, ever consider changing your moniker to anon the clueless?
Funny how Reuters doesn't agree (hint: pay close attention to the last word in paragraph 1). The argument continues to go, "price it right and the demand will match supply." True, to *some* extent, but gasoline demand is generally considered inelastic.
Places around me didn't actually run out of gas after Katrina, because they didn't have those price gouging laws in place. True, the price of gas briefly jumped enormously (to $6.00/gallon or more in places), but stations didn't run out.
You assume there is extra gasoline that can be brought to market and keep prices stabilized, and that's not the case.
I don't see where he's claimed that. He's simply claimed that there are no "shortages," no stations running out of gas, without these idiotic laws.
Higher prices might create additional supply; it might not. It might take a while. It doesn't matter. If there's not enough supply, prices must go up. These sorts of laws merely substitute waiting in line, time spent searching for a station with gas, time spent filling up your tank as soon as it drops to 3/4 full, and the possibility of not being able to find gas when you need it for monetary cost.
I can admit that for people who are particularly poor, who have a particularly low money value of time, this may be better than the alternative of higher prices. But there are far better and more efficient ways to help the poor pay for gas.
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