Wednesday, November 7, 2012

Why The Gas Shortage Was So Bad and So Local

By John Carney

One of the things that made the recent gas crisis in New York and New Jersey even more painful was the knowledge that gas prices were actually falling across the nation.

Of course, the anti-gouging policies in New York and New Jersey played a huge role in this. Rising prices here would have attracted an influx of new supply, which would have likely raised prices elsewhere while easing the shortage here. 

In other words, the market would have helped ease the severity of the gas shortage while forcing the surrounding area to share some of the pain.

Instead, prices in New Jersey and New York rose slightly but not enough to attract supply from elsewhere.

Over at Knowledge Problem, Michael Gibberson produces this chart from What you see is that although prices went up in New Jersey, they stayed flat in Philadelphia because anti-gouging policy localized the shortage.

As it happened, gasoline prices in New Jersey rose an average of about 10 cents a gallon statewide after the storm, but that wasn’t enough to motivate extraordinary responses. Notice in this chart that gasoline prices in Philadelphia (in Pennsylvania but just across the river from New Jersey) resemble prices in Pittsburgh (in Pennsylvania but 300 miles to the west), but usually Philadelphia prices share the same market twists and turns as nearby New Jersey. Whatever happened at the end of September had Philly sharing the pain with New Jerseyans. Superstorm Sandy, on the other hand, with anti-price gouging laws prominently on display courtesy of Gov. Chris Christie, saw no sharing of the pain across the river.
Read the rest here.

1 comment:

  1. John Carney may be the only media personality who understands the essence of the Austrian School and the pathology of the MMTers:

    MMTers are so focused on sectoral balances and the interaction between the private domestic sector and the public sector that they often downplay the intra-sector dynamics.

    Finally, MMTers do not seem to fully appreciate the problems of ignorance and calculation that inform Austrian economics. They seem to recoil at even thinking about them because of the implications for the limits of political action. This also needs to be corrected.