Please, Let There Be Gas Price Gouging

Katrina comes at a very bad time for US gasoline markets.  Supplies are already tight, and now a substantial amount of US oil production and refining capacity are shut in, for an unknown period of time.  Long ago, I worked as an engineer in a refinery and it can take days to get everything restarted from a cold start.  The result will almost certainly be near-term gas shortages.

There are two ways this can play out:  1)  a short term spike in prices, as much as a dollar or more a gallon or 2) long and irritating gas lines.  Lets hope that prices are allowed to reach their level and gas lines can be avoided, but who knows what political stupidities (ala Hawaii) will be proposed. 

I really, really hate gas lines.  I hate the uncertainty of whether or not I can find a station open.  I hate refilling my tank every day to make sure I am not caught short.  And for those of you who say I am arrogant since I can afford higher prices but the poor cannot, I assure you that folks who are paid by the hour are hurt much worse waiting around for hours in gas lines than the mere irritation I encounter.  More on gas line expectations as a semi-self-fulfilling prophecy here.

PS-  Expect to see news of a refinery fire or explosion over the next week.  The risk of accidents is very high when these complex plants have to start up -- they weren't really meant to be turned on and off.

Update:  First signs of a gas shortage?
Update #2:  The Mises Blog has a roundup of economics posts supporting price spikes during spot shortages (popularly known as gouging).
Update #3:  Jane Galt has more in praise of price gouging


  1. Pat:

    The Irish solution is to make you pay for a full tank every time you fill up; say $25 minimum purchase.


    Please, Let There Be Gas Price Gouging

    Please, Let There Be Gas Price Gouging

  3. Hank:

    The "fuel shortage" we have been led to believe was real BEFORE Katrina hit the South isn't real. The American oil-producers control how much crude oil is pumped/refined and distributed in this country. When they pump and refine less, the "shortages" are manmade and force the U.S. to purchase foreign oil at higher prices. These companies and the people who own them have invested in OIL FUTURES long ago and now control how those investments are paying off. Drive through Texas,Oklahoma, New Mexico oil fields and you'll notice that there is NO pumping going on. The rigs stand still. We are being forced to pay these oil prices just to satisfy a few people's clever investment strategies. The President and his constituants ARE oil! Are you really so surprised? Or do you just feel foolish for buying into yet another Bush myth?

  4. Knowledge Problem:


    Lynne Kiesling Mr. Coyote has a post from last week (complete with good links) on that mythical economic concept: price gouging. There are two ways this can play out: 1) a short term spike in prices, as much as a...

  5. Jack Benway:

    Hank, are you insane?

    1. With consistently increasing global demand, it makes absolutely no economic sense to create a false "shortage" as you postulate. Furthermore, oil prices are set by global commodity markets with multiple global producers and consumers. Cut backs in US production may slightly impact the market, but certainly not enough to radically shift the supply/demand equation.

    2. I'm no petroleum engineer, but I'm pretty certain that the operation of oil pumping rigs is rotated in much the same way that crops are rotated.

    3. If you're so certain that these few clever people are able to manipulate a worldwide commodity futures market, I certainly hope that you're investing heavily in oil futures. If you've got them figured out, you might as well be printing your own money.

  6. Tim:

    Hey everyone,

    Gas prices are $2.60 a gallon in Indiana!!! $20 bucks got me 7.5 gallons in my tank!!! I can bet the way things are going, we will be over $3.00 a gallon by summer!!!!!!! I'm sick and tired of this!!

    I've been getting e-mails on how all of us should boycott getting gas from the gas stations for one day to show the oil companies we are tired of the high prices.

    I have another idea. We all know the oil companies will just shrug off this feeble attempt, because they know America can't live without any gas at all. Everyone will just go back to paying for the gas because it is a "need" people can't live without.

    My idea is simple. Everyone should stop using the damn convenience stores at all gas stations. No buying cigarretes, coffee, pop, snacks, ANYTHING! Just buy gas and nothing else. This way each station is going to lose revenue big time! Most stations make the majority of their money off the items in the stores and make little off the actual gas. If eveyone did this, then I think the oil companies would get the message when all their stations start losing profit from not selling all the "extras" in the stores.

    Do you think this would catch on? If so, send this idea to other people who might think the same and have them pass it on. Maybe we can get enough people to start mass
    e-mails of this Idea.

    Something has to be done to stop this gas price crap.


  7. Don:

    With all the comments above, my suggestion, for everyone who can afford it is: Don't go to work for at least 2 or three days during the same week. Repeat this once a month, until the people in Washington, get off their Ivory Towers and come back to earth.

    :-) :-) :-)

  8. Raymond Decker:

    I would suggest a movement to boycott Exon to see the response and the results of a boycott..It could be interesting..

  9. Raymond Decker:

    I would suggest we boycott Exon as an experiment and watch the results..

  10. Tom:

    Let's all boycott EXXON MOBIL,

  11. trina:

    ******May 23, 2006
    I agree with Don, Ray and Tom!!!
    Remember the horrific Exxon Valdez oil spill in 1991, which has destroyed life and the environment to this day? Did you know that Exxon was only fined $150 million, and the court forgave $125 million of that fine as long as Exxon cooperated in cleanup and paying certain private claims?
    So Exxon's criminal fine was $25 million, and CLAIMS BY PRIVATE PARTIES ARE STILL BEING LITIGATED 15 YEARS LATER.
    And wasn't Exxon's last quarter earnings over 8 thousand million?

    I emailed the following letter to 10 TV CABLE hosts, on May 18:

    While driving 40 miles along Sunrise Highway in Long Island today, I noticed all the gas stations were selling regular for $3.19...EXCEPT EXXON MOBIL. They had the audacity to sell it for $3.29. I had a eureka moment and thought of a plan.
    How did the Hispanic and the million man marches get mobilized?
    The airwaves which they listen to saturated them with the plan to do so!
    And then THE PEOPLE listened, and cared enough to mobilize. I have to say, I haven't noticed any OTHER band of Americans marching for something!

    This is where you come in! Not just YOU, (Joe Scarborough), but ALL OF YOU!!! Just one of you proposing to ban gas on Sundays does nothing.
    We buy it on Monday.
    You need to ALL focus on ONE big bad giant at a time and be RELENTLESS.
    AND ALL THOSE VOICES across ALL THE NETWORKS, in all the shows, in all the timeslots; TV and radio airwaves who are fighting for the people! I watch and admire you all. Put aside network competition, politics, rules, egos, and make a universal agenda for two weeks.
    Band together as one loud voice for a plan like this:

    Let's pick EXXON MOBIL as our first "target". They've earned it with their greed. IF Exxon thinks they're gonna stick it to us EVEN MORE this summer,
    we'll fight like David fought Goliath.
    If they gouge us more on Memorial Day Weekend.....
    Nobody buys a drop of gas from EXXON MOBIL from June 1 through Labor Day.
    We'll still get gas elsewhere, but the point is: WE MOBILize and GIVE EXXON MOBIL some PAIN AT THE PUMP when NOBODY SHOWS UP there JUNE--JULY--AUGUST--SEPT....even longer.....
    Do you think that will bring them down a peg? We don't let up on that One greedy giant.
    ...And then we'll fight another giant next. Another time. Same way.

    Do you think my plan is too simple minded? Are there conflicts of interest between competing networks? Do any networks answer to Big Oil? Is it too unrealistic? Illegal? Illogical? WHAT?
    Sometimes you need a in the movie, "NETWORK" to get something done! And a good revolution needs a strong leader. In this case, all of your voices banned together.It can be done, if you guys really do care about the people, and not just your own fame and ratings.

    We can't rely on government to help us. They are the root of the problem, anyway.(you have to take the money out of the politics, have term limits so the influence buying doesn't manifest, etc,but that's ANOTHER FIGHT...DON'T GET ME STARTED ON THAT...)

    We really only have ourselves to look out for ourselves, and you media personalities must lead it. GET TOGETHER! Send memos: One universal voice. One agenda. Now. Unprecedented? You bet.
    It's how wonderful history is made...and you guys would be at the helm!
    Let's go for it! Start the ball rolling NOW! Just 2 weeks to get the word out for June 1!
    What better time to pull this coup! Hurry!
    .....Here is my horoscope for today:
    LIBRA for May 18, 2006:
    The universe wants to give you a hand no matter how crazy your dream is.
    In fact, the crazier the dream, the better. It's time for big, bold and innovative thinking. Don't be afraid to reach for the stars.

    I didn't read it til after my Eureka drive along Sunrise Highway. It's all I needed to start typing to all of you...
    Thanks, Trina

    P.S. If all the above media hosts say nothing on air...
    what did I expect? That the media is bought of by big oil, just like our government. That's why we simple folk have to do it ourselves.
    We can start with this boycott of EXXON MOBIL.

  12. Dale:

    What a lot people and media missed in this oil
    problem we have now. Last year Shell oil bought out first, Chevron oil then acquired Texaco oil,
    then they acquired conoco oil and phillips. this gives shell control of all the gas station output of thease oil companies. conoco owned most of the oil wells in the gulf. now Bp {british petroleum} owns 76 stations. Now you see
    theas two oil companies can contol the prices
    at the local gas stations. and both companies
    are foreign owned Shell is owned by the Dutch
    and BP dont even advertize as British petroleum
    The only Oil company owned in the USA is Exon-
    So you can see as long as Shell and BP can
    control the gas prices in this country, You will
    Never see gas under $2.00 a gal. and you will
    notice Shell has always cried because we in this
    country were not paying the high prices as Europe.


  13. Lori Price:

    This has JUST got to stop...We read, listen on the radio, watch on the news, about record profits from fuel suppliers. I believe it is time for all of us to stand up and fight back.

    I believe they will not quit GOUGING until we send a message!!

    Together we could stop gouging by picking the on the highest profit oil supplier and just not buying from them. Lets see how they like going broke. The next high profit supplier may realize they will be next.

    We may have to wait in line for awhile, but give it a chance--send a message! "United We Stand" it should be all that is required. The next high profit supplier will PAY ATTENTION.

    Remember we could cause financial problems in weeks or possibly days. Let us all work together and send messages to our Radio Stations, local Television stations, Associated Press-- about what we are doing. This is real and it is happening!!!!

    I believe this can work with ONE person, in one place, with all of us it WILL fly.

  14. Gado:

    The funny part concerns all these Americans who ran out and purchased a gargantuan SUV in recent years. I love seeing them drive around like they're living the American dream. Half of them don't even appear to have families, which has to make you wonder.
    I guess if you want to spend 70-80 bucks filling up your gas tank, that's all you. However, many of us could downsize to a smaller and more efficient vehicle that would not only save oodles of cash, but help out the environment in the process and that´s critical for all of us.