The federal government announced the other day that they will investigate price gouging by gas stations. The announcement itself may have helped to ease prices a little, but most of the time, the investigators report that price movement is merely due to the forces of supply and demand. I heard on the radio this morning that the results of the investigation into gouging after Hurricane Katrina are due to be released soon.
The “market forces” argument is interesting. If a gas station raises prices after a disaster so much that their profit margin jumps 48% (56 cents per gallon to 83 cents per gallon), but people still pay, it’s still a function of supply and demand. However, the New York attorney general’s office has decided that a 25% increase in profits after a disaster is the limit of fairness. The market says the price jump is okay, but the attorney general does not.
Some businesses will take as much advantage of people as allowed. The article does point out that not every price increase is an example of gouging.
Some stations, especially those that are independently owned, have to raise prices faster because they don’t have long term contracts with suppliers, or large tanks of reserves like many stations that are part of a larger chain, according to AAA’s Geoff Sundstrom…
Other stations jack up the price in a desperate attempt to avoid running out of gasoline altogether, so they can remain open to sell their convenience store fare and keep employees working…
[O]f the hundreds of complaints they investigated, only 18 were deemed worthy of action.
It might make sense to hedge against rising gas prices. My index mutual funds seem to have the oil sector covered, but if you want to focus, Michael Sivy suggests looking into companies with North American oil reserves.
Published or updated April 26, 2006.