Raising prices in this sort of situation prolongs gasoline supplies, and
ensures that those who desperately need gasoline can get it. Failure to raise
prices in this sort of situation can mean that consumption will continue on as
normal, which will run out supplies even more quickly. Or worse, if people think
there are going to be gasoline shortages, and suppliers don't raise prices (or
ration), then they may find that hoarders run them out of gas even faster than
normal. Given a choice, I think most people would prefer to have some gasoline
at a much higher price rather than have prices stay low, but supplies run
out.
That's a pretty good description, in lay terms, of why gas prices rose late last week. In Middle Tennessee there was a spike in demand by Thursday night. Prices began to rise just as theory suggests. Why must we endure poor analysis each and every time this hurricane phenomenon plays out?
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