Last month, Americans demonized the policies of Venezuela that led to empty store shelves and widespread scarcity of the most basic necessities. North Carolina’s recent anti-price gouging laws are causing the same problems with gasoline supplies that Venezuelans are enduring.
I experienced North Carolina’s mini-Venezuelan experiment driving home from work, needle on empty, in need of gas if I was to return to my job the next day. Five gas stations later, all stated prices at $2.15 a gallon, but not one had gas. I could get home, but the next day my 30-mile round trip wasn’t going to happen.
Fact is, a gallon of gas was worth far more than $2.15. I would have paid $5, $10, maybe even $15 for two gallons of gas ensuring my trip to work. Instead, I was faced with an empty tank and dry pumps. Those before me knew of the shortage but had no incentive to change their consumption habits.
The catalyst for North Carolina’s current gas shortage is a leaking pipeline in Alabama that disrupted fuel supplies across the Southeast. Faced with foreseen shortages, regulators protected North Carolinians from high prices — an action that ensured drivers would face those empty pumps.
Thousands of people needed a gallon or two simply to get to work. Many others could be in more dire straits — perhaps an elderly couple needing a few gallons for a hospital visit, or a pregnant woman going into labor, or a single parent who must work to pay her rent.
Gas stations across the southeast United States are facing shortages of gasoline after a pipeline burst in Alabama, coupled with state anti-price gouging laws. | Photo: AP
North Carolina’s gas shortage — or realization of scarcity — wasn’t the result of a leaky pipeline; it was caused by anti-price gouging legislation. Scarcity exists always, for any product in any market. We call this a normal day. Why then, when faced with a broken pipeline, did gas pumps run dry when all commodities are in scarcity?
In freely adjusting markets, prices fluctuate according to supply and demand. In the event of a natural or man-made disaster, supplies of certain goods might drop and demand might skyrocket. But the point is, the market adjusts until some sort of equilibrium is restored.
Earnest politicians often try to circumvent the law of supply and demand by implementing anti-price gouging legislation, which makes increases in prices above an unnamed, arbitrary amount a crime. The thought behind such a law is that those in need will be unable to afford the goods and storeowners would be evil to benefit from a disaster. (Only politicians get to benefit from crisis.)
In reality, anti-price gouging rules are the reason for empty shelves and empty pumps. Price gouging regulations dictate it is better to have no food or gas, rather than access to some food or gas at higher prices.
Raising prices during a crisis ensures those needing gas can get it. Market price adjustments are the most moral path to distributing scarce goods. Yes, gasoline would be inconveniently more expensive, but it would still be available.
Price gouging regulations dictate it is better to have no food or gas, rather than access to some food or gas at higher prices
Consumer habits would immediately change; individuals would forego less urgent plans or delay unnecessary purchases in response to higher prices. Those who purchased higher-priced gas would do so knowing the benefits far exceeded the cost. This would even work in cases of food and water shortages, as individuals would determine the highest value for scarcity in the market.
And the fact is, storeowners increasing their prices are not necessarily benefiting during shortages. A service station owner needs to make up for lost income during the time he will be without gas, and in the event of a natural disaster he may even need to make up for damage costs.
Higher prices also drive entrepreneurs and companies to adjust distribution. If gas prices were allowed to increase, distributors would have incentive to divert tanker traffic to distressed areas, simply responding to price signals, as opposed to costly and cumbersome government mandates.
Eventually, I found a station with gas at $2.29 per gallon and filled up my whole 16-gallon tank. Passing by over the weekend, that station, too, was out of gas. Luckily the crisis is supposed to be over in the next few days. But the experience should be a lesson in how bad regulations caused our mini-Venezuela.
Some people joked a bit with news from Venezuela’s shortage of beer and toilet paper, but these inconveniences soon escalated to serious problems. Whether the United States distorts markets by enacting socialist policies or whether it is Venezuela, they cause the same problems.
Government, not the free market, causes empty gas pumps and empty shelves.
Greg Pulscher is a contributor for Opportunity Lives. Hear more from Greg on his weekly podcast Free to Brew. Available on Stitcher and iTunes.