Art Carden’s great article on windfall profits brings up an issue that really gets under my skin. Carden notes, “People often point to the run-up in gas prices — some gas stations were charging over $3 a gallon — after the September 11 attacks as an example of firms enjoying windfall profits.” Ah, yes, the price gougers.
In the late morning and early afternoon of September 11, a few local gas station owners noted the increased demand for gas and raised their prices to near $5 per gallon. Folks still lined up at their pumps in order to top off gas tanks before the pending (it was supposed) gas shortage.
Meanwhile, I was stuck at work tending to my (for whatever reason, it was thought) essential job. From my vantage point, the lines in front of gas stations were the result of hoarding — those looking to purchase any remaining gas they could find.
I do not take issue with hoarders, especially those who paid the post-attack premium. But I took issue when some of those very same folks sought political action after the fact — when they appealed to the state attorney general for rebates (plus, fines and other threats of legal action).
Forgotten in all of this is the truth that the market will attempt to equilibrate supply and demand — likely preserving some fuel for those of us who could not spend hours in a gas line, thus directing gas to the most urgent needs.
Of course, today the market cannot equilibrate after a crisis. The press and political class vilified the gas station owners after September 11, accusing them of being evil capitalists seeking advantages over the distraught. Now, no station owner would dare raise prices, knowing that they would face certain action once things return to normal.
The winners in all of this: The politicians and rent-seekers – those seeking to hoard at pre-attack prices. The same winners in every crisis.
Note: Forgotten is the station owner who is out of luck, and out of business, once his gas is gone. He also needs to raise prices to protect his supply in the event that replacement fuel in not soon forthcoming.
