How Does Hurricane Impact Affect U.S. Gas Prices and Market Dynamics?

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Discussion Overview

The discussion revolves around the impact of hurricanes on U.S. gas prices and market dynamics, particularly in the context of Hurricane Katrina and potential future hurricanes like Rita. Participants explore the relationship between supply disruptions, demand elasticity, and pricing behavior in the gasoline market.

Discussion Character

  • Debate/contested
  • Technical explanation
  • Conceptual clarification

Main Points Raised

  • Some participants question why gas prices increased significantly after Hurricane Katrina despite only a small percentage of production being affected.
  • Others suggest that short-run gasoline demand is highly inelastic, meaning that a small decrease in supply can lead to a disproportionately larger increase in prices.
  • A participant notes that individual store owners set prices, which may not directly reflect wholesale costs.
  • Concerns about price gouging are raised, with some arguing that investigations into price increases may be politically motivated rather than based on market conditions.
  • There are discussions about the concept of price gouging, with some asserting that it lacks meaning in a market economy, while others argue it exploits emergency situations.
  • Participants mention the role of expectations in pricing, suggesting that suppliers may raise prices based on anticipated future supply issues.
  • Some express skepticism about the motivations behind price increases, questioning whether they are justified or merely opportunistic.
  • There are observations about local price changes, with some areas experiencing price drops while others see increases.

Areas of Agreement / Disagreement

Participants do not reach a consensus on the causes of price increases or the legitimacy of price gouging claims. Multiple competing views remain regarding the dynamics of supply, demand, and pricing behavior in the context of natural disasters.

Contextual Notes

Participants express varying assumptions about market behavior, the role of government investigations, and the impact of consumer psychology on pricing. The discussion reflects a range of perspectives on how market dynamics operate during emergencies.

  • #31
I don't notice gas prices, but then I have a company gas card
 
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  • #32
I filled up today here at $2.02 per Gal.
 
  • #33
i do know that is cheap. i think its 2.59 or 2.69 here
 
  • #34
Its about 1.30E/ Liter here right now :-( Thats ~6.5 E/Gal for you non metric types
 
  • #35
russ_watters said:
As I rather suspected, "price gouging" really doesn't have any meaning in a market economy. Sellers are by definition allowed to sell their products for whatever price they can get. Charges of "price gouging" are an emotional response to an adverse market condition.
Actually the term would be "market manipulation". The front end supply and refineries were affected - but the likely culprits to higher prices are the commodities traders who bid up the prices, and maintain high prices to cover their investments. Charges of "price gouging" are legitimate, and various state Attorneys General are looking into reports of gouging. Keep in mind, the dealers had already purchased the gasoline they were selling, and they raised the prices arbitrarily.

Yes people panicked and hoarded, and bought more gasoline than normal. For many, gasoline is more or less a necessity - either one buys gas or one does not get to work. Now, in an emergency, people could have elected to 'carpool', assuming a person has made prior arrangements with a friend or colleague, or people could have used public transportation. But then one surrenders the freedom to come and go as one pleases.

russ_watters said:
Don't forget, this isn't like when OPEC cuts production to raise prices. That's collusion that makes OPEC a cartel, and if OPEC were made of American companies, it'd be illegal. But Katrina did create a real change in the oil supply. Gas stations did run out of gas and people did hoard it.
A temporary and minor change in oil supply. Gas stations ran out of gas because the demand exceeded supply.

But, some of those gas stations who did not run out of gas, and who had ample supply, did raise prices - when there was no shortage.
 

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