CAMARILLO, Calif. -- The September 12 U.S. average regular grade retail gasoline price was $3.6963, down four-hundredths of a penny from the August 22 average, according to the most recentLundberg Survey of approximately 7,000 U.S. gas stations. During the three weeks, most markets continued their downward trend led by falling crude oil prices and falling gasoline demand. But from around September 10, extreme weather and expected damage from Hurricane Ike, and to a spotty degree from Gustav before, swaths of Gulf, Southeast and Midwest [image-nocss] territory saw rapid retail price runups.
This brought about opposing price changes; for example, a 51-cents-per-gallon hike in Little Rock, Ark., and a 19-cents-per-gallon crash in Los Angeles.
Now three days later, retail prices continue to shoot up in an enlarging territory of Ike fallout due to racks jumping nearly everywhere. It is clear that Ike's effects reached far more territory than other storms have done. At wholesale some regions are teetering in inertia, giving back some of their Friday price gains as falling oil prices pull down while Gulf/Southeast gasoline dynamics pull up.
While most of the public's attention is riveted on the human misery and destruction from the hurricane, the petroleum industry is battered by a rising tide of hysterical officials and other critics calling for investigation and prosecution of "price gouging" (see related reports in this issue of CSP Daily News). Despite the decades of lessons from investigations, industry vindication and continual evidence that free market forces solve blips in supply and demand to correct price, this is the broadest, most mindless mass attack on gasoline marketers and retailers in history. Instead of insinuating or asking whether there is "gouging" going on, news anchors flatly state that there is, and newly hatched experts plead with the public to demand prosecution, egging on attorneys general and other seeking to seize the day at marketers' expense.
Outraged anchors and commentators cried "Five bucks for gas!" and begged for government action as hikes cropped up in affected markets, when in a better world, they would have reported, "Retailers are charging $10 per gallon to delay dry tanks in this emergency."
Unknown numbers of innocents will be hunted, harassed and penalized, at the very least on their reputations and cost of defense, for crimes that have no realistic definition or no basis in fact. To the number of bagged pumps from lack of electricity, evacuation and no supply, add those bagged due to retailers' dragging their feet in hiking price to avoid accusation and some who saw no other option but to close shop and run for the hills in hope of escaping a witch hunt.
The gasoline market throbs with two simultaneous disconnects: gasoline price from oil price and normal price behavior from public comprehension. High-profile protest from the unjustly accused now, during this attack on the industry, may help educate those who would cripple the business with utility-type controls. Now, before natural market forces bring falling retail prices resuming crude oil's path, when the accusers will say it was they who brought the price down with threats of fines and imprisonment. In the middle of a storm of outrage at what was an artificially weak price response to shortage, this is a moment of opportunity to defend the market's capacity to allocate and resolve supply issues by price.
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