Gas station owners have a right to charge whatever prices they choose.
President Bush and Attorney General Alberto Gonzalez have joined the chorus of politicians clamoring for more investigations of "price gouging." Senate majority leader Bill Frist promises that "if the facts warrant it, I will support a federal anti-price gouging law."
But there are no facts that could warrant such a law, and there is no basis for any "price gouging" investigations — because there is no such thing as "price gouging" by private businesses.
The term "price gouging" implies that gas stations have an ability to forcibly inflict harm on us — but they do not. Any price we pay for a gallon of gasoline — whether $1 or $3 — we pay voluntarily, based on the value of the gasoline to us. If we think we are spending too much on gasoline, we are free to drive less, to buy more fuel-efficient cars, to use carpools or busses, or to travel by bicycle or on foot. Gas station owners cannot force us to buy gasoline; they can only offer us a trade, which we are free to accept or reject.
But, one might ask, without anti-"price gouging" laws, won't owners of gasoline charge the absolute highest prices they can? Absolutely, and they have every moral right to do so — just as consumers of gasoline have every right to pay the lowest prices they can find. Gas station owners are not our servants. They are producers who spend money, exert effort, and assume risk to bring a product to market. They own the gasoline they sell, and like any property owner they should be free to set the terms of sale.
Since we pay the lowest price that we can find for gasoline (and never more than it is worth to us), and gas stations sell gasoline for the highest price they can get (and never less than it is worth to them), the price of gasoline is a reflection of mutually beneficial trade — the essence of proper interaction under capitalism. For a gas station owner to charge what the market will bear is no more "gouging" than it is for a computer programmer — or a cashier — to negotiate for the highest salary he can get.
Since the prevailing price of gasoline is the result of trade, it reflects not the arbitrary "greed" of gas station owners, but the facts of the market: the producers' costs, competition, and what customers are willing to pay. The reason that gasoline prices are higher after a natural disaster, for instance, is that the fact of relatively scarce supply leads various purchasers of oil and gasoline to compete to buy it, and bid up its price. Those who buy it are those who value it most, to the extent they value it most — like highly efficient factories overseas, or Americans providing for their most crucial transportation priorities.
Anti-"price gouging" laws prevent producers and their customers from trading at mutually beneficial prices — sacrificing their interests to the interests of those who wish to avoid the "hardship" of paying prices higher than they are used to. By what right can the government force producers to set artificially low prices and prevent consumers from bidding up the price to get the gasoline they are willing to pay for? By what right can the government demand that factory owners be deprived of the oil they are able to pay for — and their customers of the cheap products they happily purchase at Wal-Mart?
Anti-"price-gouging" laws are a particularly vicious form of price controls. Like all price controls, they deprive businesses of earned profit, promote shortages, and discourage future production. But they also forbid the indefinable: "unconscionable" prices, the meaning of which cannot be known until after the ruling of some bureaucrat. This added uncertainty discourages producers from being in business, period — especially in times of emergency, when "gouging" claims are most rampant. If a federal "price gouging" law is passed, will gas station owners do everything possible after the next natural disaster to remain open for business — will private contractors from other states rush to bring generators, food, and debris-clearing equipment? Or will they not bother for fear that the prices they set will be declared "unconscionable?"
The real threat to individual rights and justice is not the so-called price gouging of free individuals, but the price-control gouging of a coercive government. We must fight this threat by asserting, unequivocally, that gas station owners have a right to charge whatever prices they choose.
This was the dumbest article I have seen here yet. and this is by intellectual conservatives? I am a Republican. card carrying, gun owning, and all that. But to tell someone the store owners should sell this commodity at the highest price they can get away with as morally right is ridiculous. This is not a bag of popcorn. It is the means people use to get to work. Buying cars that do not use gas is not possible right now. Buying homes next to work is equally not possible. This is a situation much like increases in electricity or water prices. They are necessary. Without these the economy would suffer, businesses would be impacted with workers unable to come in. You must live in an area where cars are not a requirement. In Phoenix Arizona, you can not make it across town by foot, and public transportation is a joke. Having ones license revoked is almost a death sentence here. You should be more cognoscente of such things. Kevin.
Well, here again, the pros and cons… yes, do not have to buy the gas, but if we follow this we do not have to buy bread or milk, hey! we can graze like cows! do not go to the supermarket ! do not pay “their freely set prices” well, is not that easy, I’m a Republican too, I’m for freedom and free markets, but when in places like New York, for instance, you only have a cable operator, Time Warner, and they charge whatever they feel ok, and there is no competition, they very notion of freedom goes to hell, freedom to choose TW or nothing, because even with other services (AOL, Earthlink, etc) their “middleman” is Time Warner. This is an example of price manipulation, and lack of competition, too much in few hands, no choices, but as Mr. Epstein suggested:walk, or biking, or nothing. I’m not pointing fingers, but cars still get a lousy mileage, and other sources of energy, the ones that will really drive prices down, are not implemented, and in other cases fought against with tooth and nails by the same hypocrites politicians that cry price gouging, our country is going in a very wrong direction. One suggestion America, replace several bulbs at home with fluorescent lights, and turn off those lights you are not using, even if you have the money to pay for electricity, because with money and no oil, well… money is toilet paper, if every home does this, we save billions of barrels a year, no small contribution.
Kevin, that's just the way it is. Why is that rediculous? If you own a house that someone will pay $500,000 for, you're telling me you're gonna sell it for less? Of course it's morally right to sell for as much as you can. When you trade in a used car, you try to get as much for it as you can. When you sell a house, you try to get as much for it as you can. I don't know about you, but if I own something and want to sell it, I'm not going to sell it for substantially lower that what the highest bidder is willing to pay for it. That would be dumb. Getting around here in Montana ain't that easy without a car either. My driving habits have changed though. It's unrealistic to think that we can continue to pay the same price for gas when we have 2 billion people in India and China starting to increase their oil consumption. Also, remember that the gulf rigs were lost in the hurricane. I don't know why anyone is surprised that gas prices have gone up so much. Well, see ya later
I'm a Democrat, have been so for 45 years, during which time I've been mostly in the management consulting business. I'm a free enterprise, free market guy — for the most part, but that's another story. If anyone thinks they are getting gounged, there's a simple solution: go to another gas station. My neighborhood station charges 10-15 cents above the Seattle average. Many people will pay for convenience, as do — but I don't drive much. Nobody is forcing the local SUV owners to buy their gas at the local imporium. This gas price problem is, I think, most likely to be "solved" in time by the market. Government? Frankly, I don't want to give the Bush Administration any more chances to screw things up. Reilly Atkinson, PhD
While I am a vehement supporter of the free market, what is happening with oil prices is not entirely so cut and dry. On top of oil and gasoline having become "required commodities" (like the above poster mentioned, try commuting to work in Los Angeles by foot), don't you think it's ironic that gas prices at every gasoline station in any given city are within 2 or 3 cents of one another? There is no free market competition within the gasoline industry: every station charges the same, or only nominally different, prices with the knowledge that no matter how much they charge, people will pay it if they intend to go to work and make more money to support themselves within the free market. I'm not saying the government should subsidize gasoline prices, but what is happening is price manipulation within the free market framework. What they are doing isn't aptly described as "price gouging", what they are praticing is price fixing. Though no one oil company has a monopoly, they collectively set identical (or so nearly identical that the difference is negligible) prices, and they have a customer base that is entirely dependent upon their product. They don't actively participate in price competition, because they know full well that they can all have a tidy slice of the pie, most especially if they cooperate with each other and keep prices at an equal level. Go to the grocery store and look at the products being sold. For every major brand, there is at least one generic brand sold for less money. Now go to the gas pump and observe how the free market principle of price competition is conspicuously absent. In an ideal free market, consumers choose among a variety of suppliers for goods, and pick the supplier with the lowest prices and highest quality. When you go to a variety of suppliers and they are all selling the same product at the same rate, what choice are you left with but to pay what they ask (unless, that is, you happen to have an oil refinery in your backyard with which to manufacture your own gasoline)? Make no mistake, the last thing in the world we need is more regulations and laws to ineffectively fight a problem that doesn't actually exist (that is, price gouging), but there are laws already on the books about trusts and price fixing, and they may just be applicable in the case of the oil inudstry. Whether a problem of legality or ethics does indeed exist or not, your view of the situation is somewhat simplistic given the dependency of our current free market economy on gasoline-powered vehicles and oil-heated homes.
This is the kind of knee-jerk article that gives conservatives a bad name. If owners are free to charge whatever the market will bear, and if we all agree that gas demand is pretty inelastic, being a necessity of modern life, why aren’t gas station owners raising prices all the time, instead of just when the price of oil goes up to give them a rationale? Why haven’t owners raised prices to some exorbitant extreme and then slowly lowered prices until the price/pain curve reached an inflection point, which would probably be close to European prices?