Driving around our area these days, I see many gas stations with no gas to sell. We are having a supply disruption caused by Hurricane Ike. I haven't seen anything like this since the Jimmy Carter-era price controls. (Can anyone else remember those days?)
Coincidentally or not, our governor, in his infinite wisdom, recently made the announcement that the state would be prosecuting anyone found to be "price gouging" or increasing the price of gas unreasonably during this disruption. "How dare these evil people take advantage of all of us!," the thinking goes. "They should be thrown in jail for increasing the price of gas even more that it already is."
This leads me to ask the question: Which is better, paying about $4.50 per gallon and filling up the tank or paying $3.75 per gallon and not being able to get any? I am sure that local gas station owners want to be good citizens and neighbors. Or perhaps they are just afraid of prosecution. Or perhaps they don't want to be thought of as evil "price gougers."
From what I remember from Economics 101, when a commodity is scarce, the price of the commodity will go up. This causes two things to happen. First, people use less because of the higher price. Second, the higher price encourages the sellers to find more product and increase the supply. The combination of both brings supply and demand back into balance (in this case, gas stations would not run out of gas.)
In time, as more supply is found, or the disruption is corrected, the price returns to the previous level. Since gas stations are running out of gas, this is not happening. If the price of gas were allowed to go up, as abhorrent as this sounds, all the gas we need would be available.
This current disruption will not last long and we will soon be back to "normal." Six months from now it will have been forgotten.
But this provides us with a textbook example of how basic economics works, which unfortunately does not get taught much anymore.