Friday, September 23, 2005

Who Causes Price Gouging?

In a few days, when gasoline pump prices soar again, the public at-large will be blaming gas retailers of 'price gouging'.

Understanding that prices are always a function of supply and demand, what happens if the public decides to stock up? That's right, the prices go up faster because the supply diminishes faster. By the way, Consumer, what you are doing is called HOARDING. From Norm Heikens' excellent Indy Star article:
Experts say gas prices could rocket above $4 a gallon, and oil refiners hope consumers won't worsen already-tight supplies by filling tanks like they did during Katrina, when demand shot up as much as five-fold at some locations, said Marathon Petroleum Co. spokeswoman Linda Casey.

Not since the Sept. 11, 2001, terrorist attacks had Casey seen such hoarding, she said.

Casey is at the bat. She describes the behavior correctly. Don't complain about high prices, especially if you participated in the hoarding that led to the scarcity that drove up the prices.

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