SHARE

Floridians and the rest of America screams “price gouging” at FL gas station owners who raise prices but here’s why, economically, they’re helping everyone.

Before I explain myself, as so many armchair economists and those detached from the situation have, please understand that my heart goes out to all Floridians and, if the need arises, I’ll make some sort of donation to Hurricane relief in solidarity with my fellow Americans. 

It’s the same story every time a hurricane approaches, local media and the public share photos of gas station prices skyrocketing before a natural disaster hits. They scream “price gouging and profiteering” but here’s why economically its better for everyone, in the mean time, that gas prices are expensive for Floridians, as mean as it may sound.

Embed from Getty Images

Acts as a deterrent

First, raising prices deters people from taking more than they need. There’s a story in Thomas Sowell’s Economics primer how a grocery store owner shouted out to a horde of customers ahead of a hurricane “take only what you need” and people rushed into the store, grabbing, and emptying shelves in minutes. You’d think that people would only grab what’s necessary but that’s never the case.

People are naturally selfish. I know I would grab way more loaves of bread than I could possibly need.

Let’s take another example. Just flashlights. In the book “The Price of Everything” by Russ Roberts, he brings up another anecdote involving this simple device.

There is a compelling explanation for why it might be good for stores to raise prices on certain items — flashlights, say — during a storm. (A higher price acts as a brake for those who might be tempted to grab five flashlights they don’t need, which means that the store doesn’t run out for the people who really need one flashlight.)

Back to gas. There are some gas stations in Florida that haven’t raised gas prices as it’s technically illegal after a state of emergency is declared.

A story just hit a few hours ago where a Florida man was spotted filling Home Depot buckets with the stuff. Perhaps he’s planning to weather out the hurricane, but I can guarantee you he’ll have buckets of gas leftover when the hurricane passes and he no longer needs his generator.

Availability to those who need it

More importantly, raising gas prices makes sure those that need gas the most will get gas first. With gas prices raised and the possibility of power outages, those that will need gas are the homebound, hospitals, the elderly, and perhaps some utilities with back-up generators.

With some supply available, although expensive, this subset of people have the option to get some gas, even though it is more expensive than what they normally spend.

Consider that, if prices weren’t raised, there’d be zero supply and no option to even buy gas.

Price signaling

Finally, raising gas prices acts as a signal to non-goverment agencies and “for-profit” suppliers that there’s an incentive to get their gas, wherever it’s stored, to the state of Florida as quick as possible to take advantage of the situation. Sure, it’s expensive for the consumer but at least there’s some gas available. 

With the possibility of higher profits, a gas supplier is more motivated to get their drivers with tanks of gas to Florida, taking calculated risks where necessary.

Florida’s 1992 Anti-gouging law

While most economists agree that what I wrote above is ideal, you’ll find no politician willing to stick their necks out to overturn a 1992 Florida Anti-gouging law that punishes suppliers of goods and services who are turned into the villain for “taking advantage of the customer.”

Don’t get me wrong, gas station owners in Florida who raise their prices couldn’t give a care in the world how what they’re doing is ultimately for the greater good, ensures supply, and gets added supply to their home state as soon as possible, they’re doing it for the money. Period.

With most gas stations forced to keep prices at where they are, what you’re going to see is gas stations run dry, little to no supply making its way to Florida, and pleas from its citizens that the government isn’t acting fast enough.

You have to ask yourself, what incentive does the government have to move just that much faster to help besides their conscience?

In fact, it’s already happening.

 

At the end of the day, everyone feels emotionally better that those “nasty gougers” didn’t get rich and we blame the government for taking so long. It’s a lose-lose.

Hurray emotions.

Do you think I’m wrong? Let me know in the comments below!

LEAVE A REPLY

Please enter your comment!
Please enter your name here