North Carolina's Mini-Venezuela Experiment | Eastern North Carolina Now

    Publisher's note: This post, by Greg Pulscher, was originally published in the anti-price gouging section of Civitas's online edition.

    Driving home from work the other day, needle on empty, I needed fuel if I was to return to work the next day. Five gas stations later, still no gas. I could get home but my 30-mile round trip the following day wasn't going to happen without more fuel. Oddly enough this experience happened not in Venezuela but in North Carolina.

    The catalyst of this week's gas shortage was a leaking pipeline in Alabama disrupting the supply of gasoline across the Southeast including North Carolina. Faced with foreseen shortages, regulators acted under the guise of protecting North Carolinians from high prices, but their actions only ensured more North Carolinians were denied access to fuel.

    On the drive home, a gallon of gas was worth far more to me than $2.15 a gallon - the posted price at most stations I saw. At this time I valued the gasoline at $5, $10, maybe even $15 a gallon just for two gallons of gas ensuring tomorrow's round trip to work. Instead I was faced with an empty tank and empty pumps. Those before me knew of the shortage but had no incentive to change their consumption habits, as prices were only slightly higher than normal. Not only did those before me fill up entire tanks of gas, many filled up extra gas cans to provide against the uncertainty in the coming days.

    I and other drivers needed a gallon or two to simply get to work. Many others could be in more dire straits for a few gallons of gas: perhaps an elderly couple headed for a hospital visit, a pregnant woman in case she goes into labor, or a parent to get to work so he or she can pay rent.

    The gas shortage was initiated by the leaky pipeline, but the state's anti-price-gouging legislation made the situation worse.

    In freely adjusting markets, prices fluctuate according to the supply and demand preferences of producers and consumers. A valid concern then arises: what to do in a natural crisis or an unforeseen malfunction?

    Unfortunately, eager politicians approached this problem by implementing anti- price gouging legislation, making increases in prices above an unnamed, arbitrary amount a crime. The thought behind such a law is those in need will be unable to afford the goods and store owners would be evil to benefit from a disaster. (Only politicians get to benefit from a crisis.)

    In reality, these anti-price gouging regulations are the reason for empty pumps. Price gouging regulations dictate it is better to have no gas than access to some gas at higher prices.

    Allowing prices to reflect market realities during a crisis ensures those needing gas can get it. Market price adjustments are the most moral path to distributing scarce goods. Yes, gasoline would be more expensive, but it would still be available.

    Consumer habits would immediately change. Individuals would forgo less urgent plans or delay unnecessary purchases in response to higher prices. At a higher price, consumers would buy only enough gas to satisfy their most urgent needs, knowing the benefits exceeded the cost.

    Storeowners increasing their prices are not necessarily benefiting during shortages. A service station needs to make up lost income for time it will be without gas. Even in a natural disaster, storeowners need increased prices to make up for lost income and for repairs caused by the disaster.

    Higher prices also drive entrepreneurs and companies to adjust distribution. If gas prices were allowed to increase, distributors would be incentivized to divert tanker traffic to distressed areas. And they could do it more swiftly, because they are simply responding to price signals, not costly, cumbersome government mandates. The shortages would be relieved far more quickly, and prices would begin to drop down again rapidly.

    Last month many Americans mocked the socialist policies of Venezuela that led to empty store shelves and no access to the most basic of goods. Sadly, North Carolina's anti-price gouging laws caused the same issues we read about in Venezuela.

    I eventually found a station at $2.29 per gallon with gas and filled up my entire 16-gallon tank. When I drove by today, that station too was now out of gas. Luckily the crisis is set to be over in the next few days. However, this should be a reflection of how regulations caused our mini-Venezuela, and how government interventions into the market's pricing mechanism produce predictable, yet preventable, results.

    Some people joked a bit with news from Venezuela's shortage of beer or the entire country having no toilet paper, but these inconveniences soon escalated to serious problems. Whether it's the United States or Venezuela, government intervention into the economy causes the same problems.

    Empty gas pumps and empty shelves are caused by government, not the free market.

    Listen and read more from Greg on his weekly podcast "Free To Brew"
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