New Jersey Gas Shortage

Since getting pounded by Hurricane Sandy just a few days ago, there are major shortages of gasoline in the northeast, particularly in New Jersey, which was hit the worst.  There are long lines at gas stations and many places are running out.  There are some reports of fights due to the problem.

As a libertarian, whenever I see a problem in the marketplace, I can inevitably find interference from government.  In a free market, a gasoline shortage would be quickly resolved, particularly in a place like New Jersey that is very populous.  Unfortunately, there is no completely free market in existence.

There is news that the governor of New Jersey, Chris Christie, is ordering officials to waive licensing requirements to import fuel form out of state.  Normally, merchants who are not licensed are not legally allowed to buy gasoline and diesel from out of state and import it.  I did not even know that such requirements existed, although I'm not surprised.  Government at all levels makes our lives more expensive and more difficult and most of these things we don't even know about.  I wonder how many other states have similar requirements.

While these ridiculous licensing laws (probably another big tax) should be repealed, it is right of Christie to waive them, even if it is just temporary.  Anything that loosens the grip of government, even if just a little bit, can be helpful.

In addition to this, this article goes on to discuss how the EPA is temporarily waiving certain federal clean gasoline requirements under the Clean Air Act.  Again, more government garbage that makes our lives more expensive and more difficult.

However, probably the worst thing that is causing a gas shortage, are the so-called anti-price gouging laws.  Chris Christie, who somehow has a reputation of being conservative and pro free market, has shown that he is another big government hack.  Christie came out early on during the hurricane and announced that price gouging is illegal and that it will carry stiff penalties in New Jersey.

Not only are price gouging laws vague, they are terribly inhumane.  The media and establishment like to tout these laws as serving justice, but it is actually quite the opposite.  It is an interference in the marketplace and it is during a time of critical need.  These laws interfere with voluntary trade between individuals.

When you see a place like New Jersey with gasoline shortages, you can be almost certain that there is government interference with pricing.  Prices should be allowed to fluctuate to adjust to the supply and demand.  If prices are held artificially low, then there will be shortages.

Let's say that there were no price gouging laws in New Jersey.  This means that gas stations could instantly start charging higher prices, possibly dramatically higher.  But this would be a good thing.  First, it would actually reduce demand.  If the price went to $10 per gallon, then some people might not be as anxious to fill up.  Someone with a big truck with a 20 gallon tank might only fill up halfway.  The higher price conserves gas and it would make it available to those who most desperately need it.

Second, the higher price will lead to more supply.  There is a saying that the solution to higher prices is higher prices.  If gas is selling at $10 per gallon, then there would be significant motivation for suppliers to get gas there quickly and divert it from other areas.  A tanker could load up gas a few states over (not affected by the hurricane as much).  It might be worth it for a company, or even an individual, to buy gas at $4 per gallon and drive it into New Jersey to sell it at $10 per gallon.  The profit would be $6 per gallon, less the expenses of transporting it there.

But it is important to know that these higher prices would be quite temporary.  As more supply found its way into the hard hit areas, the prices would quickly recede.  In today's world, it probably wouldn't take more than a few days for prices to get back at least fairly close to where they were before the hurricane hit.

Price gouging laws do not just affect gasoline prices.  They affect almost everything.  That is why there are shortages of so many supplies.  It is the same story for batteries, candles, hotel rooms, chainsaws, generators, lumber, bottled water, ice, and so many other supplies.  If prices would be allowed to rise, then goods would be distributed more efficiently towards those who really need them the most.  In addition, shortages would not be as pervasive and would not last long.

In conclusion, whenever you see that there is a shortage of something, it is a good clue that there is government interference with pricing.  In a free market, shortages are quickly resolved through higher prices.