As mad as the possible trade sanctions make me, the anti-gouging laws are much worse on the Isaac blood pressure scale. First off, the definition they gave, “Federal Price Gouging Prevention Act – Makes it unlawful for any person to sell crude oil, gasoline, natural gas, or petroleum distillates at a price that: (1) is unconscionably excessive; or (2) indicates the seller is taking unfair advantage unusual market conditions or the circumstances of an emergency to increase prices unreasonably.” is so vague that it is totally useless. I think we can all imagine who will get away with stuff and who won’t… Secondly, there is no such thing as “gouging.”
Supply and demand will determine the ballpark price for anything out there, and there are zillions of things that can affect those. In the end, it comes down to someone offering a product at a price and people deciding if they want it or not. People resent sudden spikes in prices during unusual circumstances, but they are ESSENTIAL to both ensure that there is an adequate supply and that more will come as soon as possible. This is especially the case when it comes to important things like gasoline. Here’s an example. Imagine there is some sort of disaster and no more gasoline will be able to get to the effected area for 3 months. As gas stations open back up, they continue to sell at the same price that they did before the disaster. All but one, he raises the price to $35 a gallon. People are outraged and refuse to go to his station. Well, due to both higher than normal consumption (more driving to find supplies, powering generators, panic buying, etc.) and no more deliveries, all of the other gas stations run out of gas in a week (I’m being generous here). The one charging $35 sells very little, but he does sell gas every day to the people that really need it, emergency services, people running dialysis machines with generators, keeping insulin cold, etc. These people that have a true, urgent need have ready access to gasoline. Granted, they are paying through the nose, but that is far better than going without insulin, dialysis, or the fire truck not being able to come to your house. The people that are not willing to pay that much make due some other way, it isn’t fun, but they figure out how to live the best they can without gasoline. Ideally, all of the gas stations would raise their prices. It would end up being higher than usual, but not quite as bad as $35. Why?
Whenever you are faced with more demand than supply you have to figure out how to distribute the goods. In the case of chewing gum, it’s no disaster if you screw up, but in the case of gasoline, there can be serious consequences. Obviously you would like to distribute the gas to the people with the most urgent need first, but how do you figure that out? You can’t rely on people just telling you in a general situation (as opposed to a family or friend situation), and it is far too costly to do surveys and whatnot. Price is the most effective rationing tool. Everyone has a price they are willing to pay for anything, as the need goes up, so does the price you are willing to pay. People that do not have a great need decide not to buy at the “outrageous” price and this opens up supplies for the more needy. “But then only the rich will be able to buy it!” BS, even someone who is really wealthy will not spend $350 on a tank of gas unless it was urgent. The poor will have to do some scrounging, no doubt, but that situation is far far better than having no gas at all. And make no mistake, that is the choice. Either sell at a higher price or run out of the product.
“But people make more money!” Yeah, so what? They are also supplying a needed service. Once again, what is important is that consumers have access to the things that they want. If someone makes money (or even gets rich) in the process, all the better. Let’s imagine our example with a slight twist, let’s imagine that gas could get to the affected area, but it would be difficult. If prices are forced to stay the same, the gas companies won’t have any real incentive to speed up the delivery process. If gas is selling for $25 a gallon, you can be sure that the companies will move heaven and earth to get more there. As the supply ramps up, there will be less and less justification for higher prices, so they will come down. The quickest way to get supply and price back to normal is to allow the prices to go as high as they can. Anti gouging laws (if they are enforceable at all) will only make sure that supplies run out in bad situations and that it takes longer to resupply. Bad news…