Friday, November 9, 2012

Why gas is scarce in NY and NJ

America last experienced lines at the gas pump in the 1970s under Jimmy Carter when OPEC cut back on exports.  Gas lines are back again in NYC and NJ in the aftermath of frankenstorm Sandy and this week's nor'easter Athena.  As we all know, Mother Nature wreaked havoc; shipping terminals have been damaged and many areas still lack power.  Politicians in both states have followed the Carter playbook and adopted odd-even rationing (WSJ report here).  This is expected to last at least two more weeks.

Anyone with a basic level of understanding of economics would immediately consider whether the human element might also be at work.  Let's start with laws designed to prevent price-gouging.  NY will hit gas station owners with a $10k fine for anyone charging 
"unconscionably excessive" prices charged by any party within the chain of distribution for necessary consumer goods and services during a declared state of emergency. Prima facie proof of "unconscionably excessive" includes evidence that (i) of a gross disparity between the amount charged and price for the same goods immediately prior to the abnormal disruption; or (ii) the amount charged grossly exceeds price at which same or similar products.
NJ has a comparable statute. 

Let's also remember that EPA regulations restrict the types of gas that can be sold by location and season.  Ironically gas prices here in Raleigh are cheaper than they have been in years while people in NY and NJ suffer.  Don't you think some trucks could divert supplies if there were an incentive to do so?  As this op-ed from a NJ newspaper points out, higher prices motivate suppliers to find more fuel and encourage buyers to economize. 

Bottom line: there is no doubt that Sandy hit NY and NJ with a wallop but a month of gas shortages is at least in part a man-made disaster, 

No comments:

Post a Comment