Gasoline Prices Skyrocket along Texas Coast;and this is a good thing

From the Houston Chronicle,

Wholesale gasoline prices hitting $5 on Gulf Coast

Fuel prices are "going absolutely ballistic" today as Hurricane Ike heads toward the "largest refinery cluster on the planet," says Tom Kloza, publisher and chief oil analyst at the Oil Price Information Service.

Prices of spot or wholesale gasoline _ which is what refiners charge retailers _ ranges anywhere from $4.25 to $5 a gallon along the Gulf Coast. Some other markets also are up sharply, Kloza says.

That's up from about $3.30 a gallon yesterday, before forecasts had Ike making landfall near Freeport and threatening Southeast Texas _ with all its refineries _ with hurricane force winds.

When the demand increases suddenly and the short-term price elasticity of supply is very low, one expects precisely this result: rapidly rising prices

The good thing about this is that entrepreneurs in other regions, outside the Texas Gulf coast, will now have a big incentive to rush tankers to the area during the next twelve hours or so (well before Ike hits) to capture some of the potential gains: high prices serve as a signal for more scarce resources to move into an area. Without those higher prices, the transportation costs and added risks would not be covered, and less gasoline would be shipped into the areas.

Furthermore, the high prices will deter many folks from topping up "just in case" and limit the gasoline purchases to those who value the gasoline more (in the sense of being willing to give up more to acquire it). Here's hoping they don't put in price-gouging laws to thwart these efficiency effects of the rising prices.

Comments

[William Polley]

It will be interesting to see whether output from the refineries will be affected. If distributors who are served by those refineries are worried about whether they will be restocked after the hurricane, they may be less willing to part with their supplies now. We will see. But this gives me an idea for a blog post!

[smitty]

i just filled up in houston, paid $3.21/gallon, which i think was decently low compared to recent prices. it certainly didn't sky rocket...but we're just off the coast, not on it, and don't have mandatory evacuation in our area.

[Mike Moffatt]

Here's hoping they don't put in price-gouging laws to thwart these efficiency effects of the rising prices.

Gas companies gouging consumers, says Harper

http://www.theglobeandmail.com/servlet/story/RTGAM.20080912.welxngas0912/BNStory/politics/home

"Conservative Leader Stephen Harper accused oil companies of price-gouging on soaring gas prices and said he's planning to lay out a promise to address this later in the campaign."