Coyote Blog: Volume Gouging

Excellent economic analysis of gasoline pricing, supply, and demand.

"These stations gouged me on volume, simply because they didn't have the simple courtesy to re-price their product upwards in a shortage in order to ensure continued availability of supply. By the way, memo to news guys -- telling everyone to run out and fill their tanks RIGHT NOW in order to avoid a possible gasoline shortage will only precipitate said shortage. If everyone fills his or her tank at the same time, this shifts inventory from large regional reservoirs to individual reservoirs (e.g. gas tanks), the most inefficient of inventory storage models. Having every car's gas tank go nearly instantaneously from 5/8 full to full requires something like 600 million gallons of draw down from retail and wholesale inventory to car fuel tanks. The system cannot survive that in 24 hours, and the hypothesized shortage becomes a reality."

Coyote Blog: Volume Gouging