Posted on 11/27/2008 9:26:58 PM PST by MitchellC
Medhat Salameh is in trouble. During the gas shortage, people working at his gas station took it upon themselves to adjust the price of fuel accordingly. His gas station raised prices as much as 46%, netting over $4200. Salameh flagrantly flew in the face of government, failing to consult his legislators on the latest mood in their powers to deem, and responded to the market.
Worse, consumers defiantly purchased the overpriced goods without consulting their attorneys.
Asheville resident Don George fueled his Volvo at M&J Wednesday evening. George said he buys gas there about three times a month and remembers filling up during the gas crunch.
“It was high, but I also thought if you don’t get it when you can, you’re going to be stuck without it,” George said. “So I got gas in spite of the price because they had gas and other places didn’t.”
George said he thinks M&J’s prices are comparable to other area stations.
“If I only have to come this far to get it and not drive any further, then it’s kind of a trade-off, and I’m willing to make that trade-off,” he said.
Salameh now has to pay reparations to George and the other victims of what evidently constituted an unnecessary use of force. A civil fine of $5000 has also been assessed.
Didn’t NC turn blue last election?
Get used to this.
Locally, in the Sandhills, rumors that gasoline was going to well over 5.00 per gallon prior to the storm's hit sent people out in droves to convenient stores. On US 1 in Aberdeen and Hwy 5 in Pinehurst people were lined up in the streets to get fuel. In neighboring Montgomery County, prices went to well above the 5.00 per gallon mark, and in other places close to 6.00 per gallon.
There was quite a bit of coverage of this situation and the laws on WRAL.
Further proof that people BADLY need to be forced to study economics.
Restrictions on price gouging can be inadvertantly disastrous, as people wind up stock-piling on artificially cheap goods. In a situation where prices were allowed to rise where supply became suddenly restricted and demand sky-rocketed, then goods would be directed to where they are most valued. Somebody who really only needs a quarter tank to get through the week would get a quarter tank, not fill up, leaving more gas for those behind him.
Likewise the first twenty people to the store wouldn’t buy all of the milk and batteries. People would sleep in their cars, saving hotel rooms for those large families and others who much more value a roof over their head. Etc.
Of course, most people don’t study economics and have no idea what the second order effects are of policies they support. Plus, “price gouging” just sounds mean and greedy, even though it does *not* result in a shortage where price ceilings *do* (sometimes spectacularly).
Imagine two states, one restricting price gouging, the other allowing it. A hurricane or some other debilitating crisis hits. Prices stay low in the first state and skyrocket in the others. If you own a business, where would you decide to ship your goods? To where prices are skyrocketing, or to where they are lower? The answer is obvious, and this is why price controls often result in catastrophic shortages of badly needed items during emergencies.
This is the true legacy of liberalism, all this human waste moving from blue states to red states and turning them blue too.
For myself, the period after the twin storms was an example that native-born NCers could be just (if not more) ignorant and grasping than any imported blue-stater. I don’t know how many people came by the offices and complained that the whole gas price structure was rigged. At the peak of the price levels, we were making no more than 2 cents per gallon, if that, and for a few days were upside down because we couldn’t raise the price fast enough to keep up with the cost rises.
And it was NCers from birth who assumed there was goughing going on.
Must be the TV stations they were watching.
I don’t remember price gouging. I remember gas stations without gas and those gas stations with gas being forced by the government to sell it at an artificially low price. As a result we had nearly all stations in Charlotte without gas.
Some stations early on did try to raise prices in line with their expectation of the cost to procure the next gallon of gasoline. When you can’t procure the next gal of gas, the price is nearly infinite. You have to raise prices. Those stations that did so were threatened by government.
As a result people did not behave rationally, knowing that there were going to be disruptions to the supply of gasoline they horded. I sat behind a caprice classic as it filled it’s enormous tank and 5 (FIVE) 3-5gal jugs stored in its trunk with gasoline. That person was emblematic of what was going wrong. Clearly gas was in short supply and people were making the situation worse because they weren’t changing their behaviors. Raise the price to $7/gal and perhaps that person doesn’t behave insanely.
Ivan was a non-event in NC in 2008 as it came ashore in 2004. Ike was a non-event as well. No areas had to be evacuated so gouging laws should not have been in effect.
NC unfortunately chose to repeal the most important law and that is the one founded in reality and premised on rational behavior.
NC repealed the laws of supply and demand.
I continue to contend that had prices drifted up to $7-10/gal, suppliers would have moved heaven and earth to resupply faster and people would have behaved rationally by changing their behaviors in a shortage. As it was the government forced people to not see the right price signal and we were without gas for longer and took longer to get out of it.
Exactly right ... but you’ll still find people, even on FR, railing about “gouging” because it’s NOT FAIR, WAAAAAAA! May the complete works of Thomas Sowell fall on their corn toe, as the saying goes ...
We had spot shortages here in eastern SC but most stations were able to find supplies in less then 24 hours, the average price was over $4.
I notice that nobody is demanding price controls now that the selling price is falling.
“Ivan was a non-event in NC in 2008 as it came ashore in 2004. Ike was a non-event as well. No areas had to be evacuated so gouging laws should not have been in effect.”
I am sure you know which hurricane I am referring to, and yes, it was a NON event here in NC.
I disagree that price gouging laws should not have been in effect. There was absolutely NO reason for gas prices to have spiked from a little over 3.00 per gallon to close to 6.00 per gallon in some places. This was an immediate spike on a Friday afternoon, IIRC. This price increase was based solely on what retailers expected to pay in the days to come, not on what they had paid for what was already in the ground.
Under North Carolina law, the governor must make a disaster or emergency declaration or proclaim an abnormal market disruption for critical goods and services for the state Attorney General’s Office to investigate and prosecute allegations of price gouging. The law applies to all levels of the supply chain, from manufacturers and distributors to retailers.
“As a result of Hurricanes Gustav and Ike, oil refineries in Texas and Louisiana have temporarily interrupted some gasoline supplies to the pipelines that serve North Carolina. Therefore, there may be temporary limitations on our gas supply,” Easley said in a statement. “Wholesale gas prices are up less than 20 cents a gallon over the last few days. Therefore, consumers should not see prices rise substantially more than this rise in the wholesale price.”
http://www.wral.com/news/local/story/3536058/
“I have to wonder how you know what you’re alleging here. Was it “clear” that they were “gouging,” simply from the rise in prices? Are you a reader of hearts/minds? Were you privy to all of the information they had, including their books?”
Please. It was clear when prices rose from 3.49 per gal to 5.49 per gal, in a matter of minutes, that gouging was occurring. FYI, I am privy to one local gas station’s books, and I know they’d just filled their tanks, and had plenty of supply, but raised their prices anyway. It was a panic price increase.
The retailer cannot have a profit margin larger than any profit margin in the last six weeks prior to an event. The particular retailers being forced to refund and pay fines had sudden increase in profits; profits larger than they had in the six weeks prior to the event. Gas prices go up as major oil companies raise rates on retailers and the higher prices are passed on to customers. Anything more than that pass-through is considered gouging; intentional or not, and it is against the law.
In determining whether a price is unreasonably excessive, it shall be considered whether:
(1) The price charged by the seller is attributable to additional costs imposed by the seller’s supplier or other costs of providing the good or service during the triggering event.
(2) The price charged by the seller exceeds the seller’s average price in the preceding 60 days before the triggering event. If the seller did not sell or rent or offer to sell or rent the goods or service in question prior to the time of the triggering event, the price at which the goods or service was generally available in the trade area shall be used as a factor in determining if the seller is charging an unreasonably excessive price.
(3) The price charged by the seller is attributable to fluctuations in applicable commodity markets; fluctuations in applicable regional, national, or international market trends; or to reasonable expenses and charges for attendant business risk incurred in procuring or selling the goods or services.
http://www.ncga.state.nc.us/EnactedLegislation/Statutes/HTML/BySection/Chapter_75/GS_75-38.html
How does that change the fact that these retailers make most (or, a significant portion) of their money off the in-store purchases and not the gas purchases, yet the in-store purchases rely on a steady flow of gas purchasers, therefore the retailers have to ration the gas?
It doesn't change that fact at all. Rationing gas is entirely different than price gouging. Placing purchase limits on items is NOT illegal in NC.
IMO, and this is just IMO, regarding profit, it would seem to me that rationing would still guarantee additional in store purchases by consumers. While they may be limited in the amount they could purchase, they would still be purchasing fuel at a 'normal' price, and stores would still be doing other in store business. Retailers usually only make a profit of a few pennies on the gallon, and would make more profit off of the sale of a 12 oz cup of coffee than a gallon of gas. Dramatically increasing prices to the point of consumers not being able to afford additional items would cause a business that depended upon the sale of fuel to suffer slower in store sales as the consumer would be limiting their purchases to fuel only. Many would just buy the fuel and forgo that cup of coffee.
My experience here locally was that retailers were limiting gas purchases to 10 gallons per customer AS WELL AS raising the prices to extraordinary amounts. I believe one store in Candor not only limited the amount of gas available for purchase, but also raised the price to over 6.00 for a short time, and then lowered it back to 3.99 later in the evening. They were rationing AND price gouging.
Look, these specific retailers were audited and found to have committed an illegal act. While you or I may not like the law pertaining to that act, it is the law nonetheless. Does it have its negative effects? I'm sure it does. Does it also protect consumers? I'm sure it does.
A retailer must always price at the cost of receiving the next widget, i.e. the marginal cost. If they choose not to, they are choosing to either lose money or go out of business. In this case, the government chose for them to lose money.
Yes the cost of the next gallon was affected by supply disruption in TN. By making prices low, people horded gasoline and we ran out faster and took longer to recover from the disruption. Had government not forced these businesses to sell at a loss (and there was a net loss of revenues to these businesses), the prices would have risen and people would have changed their behavior as a result of the price signal.
It is very simple economics. Simple economics are based on rational behavior by the buyer and seller. In this instance the State relied upon television and other media to tell people not to buy what people knew was going to be disrupted. People behaved rationally to the State telling them to behave rationally— they horded. Had prices risen to 7-10/gal people would have bought only what they needed and traveled less by car.
I ask you: Did what the state make happen work? What were the transactions costs to you and me and everyone else in the Piedmont of the Carolinas? Was it more compassionate for the buyer to have no gasoline for longer and wait in longer lines for gasoline? Or would it have been better for everyone to ration what they took given the higher price to receive it?
I understand that. I am no economist, but I can get the basics. I disagree that the state chose for anyone lose money. On any given day, selling gasoline is not profitable in and of itself. Gas is a loss leader. It simply attracts customers who may buy higher profit items like coffee or sandwiches. The few cents profit margin on the gallon is easily offset by the costs of accepting credit cards. This is on a normal day with no crisis.
Yes the cost of the next gallon was affected by supply disruption in TN. By making prices low, people horded gasoline and we ran out faster and took longer to recover from the disruption. Had government not forced these businesses to sell at a loss (and there was a net loss of revenues to these businesses), the prices would have risen and people would have changed their behavior as a result of the price signal.
Prices were not "made low". They were prevented from becoming unnecessarily high. During Ike, wholesale prices did not rise to the levels that were anticipated by retailers. I believe the increase was less than 20%, yet the retail price rose by much more than 20%. Our laws, like them or not, simply do not allow for this type of increase.
It is very simple economics. Simple economics are based on rational behavior by the buyer and seller. In this instance the State relied upon television and other media to tell people not to buy what people knew was going to be disrupted. People behaved rationally to the State telling them to behave rationally— they horded. Had prices risen to 7-10/gal people would have bought only what they needed and traveled less by car.
You cannot blame the government for the actions of people. Had prices risen to those levels, people could not have afforded even what they needed.
I ask you: Did what the state make happen work? What were the transactions costs to you and me and everyone else in the Piedmont of the Carolinas? Was it more compassionate for the buyer to have no gasoline for longer and wait in longer lines for gasoline? Or would it have been better for everyone to ration what they took given the higher price to receive it?
While I can't speak for others, I suffered no ill effects from anything the state did to regulate prices during this time. Prices remained at the 4.00, give or take, mark here, for the most part we had supply, and neither our personal or business life was interrupted, save for my husband occasionally having to go to one or two gas stations to find and purchase diesel. Honestly, no one suffered devastating effects from this. It was more of an inconvenience than anything. Again, I have no problem with rationing in times of market disruption.
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