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Many of those on the left (and some on the right as well) have been crying "Price gouging!" recently. This will probably return with Rita. What they don't realize is that these natural spikes in prices are actually vital.

When a good or commodity finds itself in very high demand, companies realize that they can raise prices and still sell everything. Prices can go up several hundred percent in a matter of hours. If the free market were allowed to work unhindered, prices of wood, water, batteries, gas etc. would be going through the roof right now.

Those uneducated in economics (or those who choose to be ignorant) call the spikes in prices "greedy profiteering". Well, perhaps if these people could look past the immediate result of an action, they would realize that we need these natural price increases.

First, it encourages higher supply. If prices are much higher, there would be many more people and businesses willing to truck down those needed goods to sell for a high profit.

Second, it discourages hoarding. For example, people who would would otherwise fill up both cars, their lawn mower, and several containers of gas in their garage at only $2.50 a gallon would be much less likely to hoard it if gas were $6.50 per gallon. This prevents the widespread gas shortages that Texas is experiencing.



Whenever a price is artificially capped, shortages occur. We should allow the free market to work.

What you don't take into account is why it is going up. If the prices were going up naturally then it would be much better (with the rise and fall of the economy) but because these hurricanes are actually damaging refineries it actually makes things a lot worse. When prices are going up because demand is higher then the amount of gas you have it can cause other side effects then the ones you talked about. But I do agree that it will create a little more business for a few people.

What are those side effects?

Well for instance in Toronto yesterday of course there were a ton of people were trying to get gas before the prices are supposed to sky rocket. There was an incident where someone had to be taken to hospital when they were attacked for butting in line. So basically the civil unrest we are seeing now.
Also as people were evacuating Huston there were massive lines to get gas and there wasn't enough for everyone so now people are stuck on roads while the hurricanse is comming.

Yea, allowing prices to rise would alleviate that as well.

Allowing prices to rise would alleviate civil unrest?

Yes. If you read my original post, you'd understand that there would no longer be long lines and shortages.

What you're missing is the fact that we probably have enough oil for everybody right now that prices would be lowered and go back to normal. Gas companies can raise the price of gas within 24 hours yeat it takes 2 months for them to lower the price. This is because they ARE greedy.

They bought (lets say) 2 months worth of gas at a gas station. Two days after they bought the gas they got a call from their boss to raise their prices (some refineries in Iran were blown up). Okay, so 10 days later the gas amount returns to normal, but the gas station still has over a month left of gas before another refill.

The gas station wont get a call from their boss until they run out of gas and get a refill. Thats when they will change the price again. (after they made 20 cents more per liter for a month)

Yes, free market system and all that other business you talked about I agree with. But gas companies ARE greedy.

I'm not disagreeing that they're greedy; I am disagreeing that their greed is harmful.

Of course it can be harmful. Its not like the gas company is giving back all that extra money they made to the country or the people. They're keeping it for themselves.

Some very poor families may have trouble buying gas. They may have to sell one of their cars (if they have two) just to get around (and no one may buy it because the gas prices are too high). Some families might not even be able to drive because it costs $70 to fill up their car.

I just filled up my car with gas today before the prices begin drop. Right now it's $2.59 for just the normal unleaded gasoline. I hope it lasts for a while

Do you disagree with what my original post is? If not, you're being ridiculous if you think poor people will have readily available gas if prices are artificially capped.

For some reason you don't seem to know what civil unrest is. It isn't just people in line waiting to get gas beating eachother with crowbars, people will become angry with the governemnt and the gas companies because they can't afford to travel to work. There could be rioting and other kind of protests. But no, it shouldn't be artificially capped.

There will be much more "civil unrest" if there are long lines and shortages than if prices are higher. I don't even think I've ever seen a single riot around an area with "price gouging" at gas stations, but we have seen riots when prices are capped (look at the 1970s).

Also have you ever considered what it would do to the rest of the economy if people had to pay 10$ jsut to get to work everyday? The amount of money made off of it wouldn't get back into the general population that easy. There would be people going bankrupt because they cant afford to get to work everyday and end up losing their job. The amount of jobs that it would create would not be enough to cover that.

The prices wouldn't (and couldn't) stay high; market forces would bring them down.

well there are defiantly examples of price gouging that are painfully evident one of my favorite being where i live now . essentially my town is split into two sperate hamlets but still have the same local goverment and taxes for both areas, yet some how though in my half its was about 3.09 to 3.03 a gallon while in the other half of town it was 2.99 to 2.95. what is that called?

I don't think a lot of you are getting what Ego is talking about. Suppose the prices are high. That's not really a bad thing. Nobody will be able to afford, or want to buy it. So, if they want to sell it, guess what? The prices will go down. Supply and demand, the price will drop until it is getting sold again, or whatever competing gas stations will lower it to. Given time, a free market economy will be able to fix itself.
Suppose the government steps in. Max price is $2.50. You drive over to your local gas station. About a quarter of a mile away, you're stuck in a massive traffic jam. That's weird, there's never been one on this road. Oh, the gas is cheap again, everyone has decided to buy some. Then you see up ahead a sign... "Out of Gas". Looks like its already gone.

But because there is a lack of supply the prcies will go up and down to quickly and the prices will start getting a lot higher. I do get what Ego is saying, the economy is supposed to go up and down just not that fast.

Prices should go up that quickly because demand is doing the same. I'm not going to repeat why this is a good thing, becuase I already said them in my first post.

However, prices can't stay that high forever for two reasons (ChuOS used better words than I did):

First, the many people willing to sell products at the higher prices will increae the supply of the needed good, which will lower prices some. Then, once the demand subsides, prices will shoot back down because people are no longer willing to pay the higher prices.

Just because people will no longer pay the prices doesn't mean they can afford to put the prices lower, the lack of refined oil means that they need to sell less at a higher price to make a profit (which of course you know) which means there is a limit to how low they can put it, and with less supply its a lot higher.

Well, if it's at a point where thay can no longer lower prices, then it's ridiculous to call it "price gouging".

Greed isn't that bad, not for our economy anyways. It's not like they're charging 500$ for gas. If there's a shortage, raise the price. If there isn't, lower it. That simple.

I may be going a bit offtopic, but I think this whole free-market gloablism thing is very unsound. If you've read Greg Palast's book (There's a good bit of evidence in it, so I trust it), you can see that free-market economics cause markets to lose money quickly as capital flows out through unrestricted barriers and lack of tariffs. Corruption and intentional sabotage (as seen in the California energy crisis) cause prices to rocket, artificially. The unrestricted market causes the third world countries that are on this free-market regimen prescribed by the IMF to go bankrupt, poverty usually rises, unemployment rises, literacy drops, and many times the mortality rises, as hospitals, schools, and other vital instituitions, and many times, commodities, are taken over my ususally corrupt foreign companies, raising prices again and again. Riots sson follow, as demonstrated in Buenos Aires. Foreign banks usually pick up the profits, vulture-like.

What a joke!

Free markets haven't worked in thrid world countries because the people there have no respect for private property, and their governments quickly become corrupt and fail to protect that private property. However, no economic system can save them.

If you ignore what free markets have done for China and the United States, you are either blind, or have a agenda against capitalism.

By the way, the argument about money flowing out of a country is absolutely ridiculous.

If you want a truly good book (without a politcal agenda, though clearly biased), pick up Economics in One Lession by Hazlit.

It is written in simple language, and is actually entertaining to read!