BuckeyeBlog

The following is a video interview with John Hofmeister (former president of Shell Oil and founder of “Citizens for Affordable Energy”) that appears today on the website of the Washington Times:

Around 1:20, John makes his proposal:

My advice would be to go to odd-even purchase and to restrict the amount available for purchase to some number.  And that would shock enough people to say, “Maybe I won’t drive today, or maybe I’ll carpool for a month.” (more…)

With the price of gas rising, you hear a lot of people condemning “price gouging.” Economist Alex Tabarrok has a great post about why these people don’t know much about markets over at his superb blog Marginal Revolution:

Many people think that price is determined by historical cost.  Price is never, ever, determined by historical cost. Price is determined by supply and demand.  If supply or demand change then the price changes regardless of historical cost.  Last year’s fashions?  The price falls regardless of cost.  Chopped up dead sharks?  If demand is high, the price is high regardless of historical cost.  If the demand for gas were to suddenly fall, the price of gas would fall too, regardless of cost.  In the present situation the supply of gas has been reduced and the price has gone up.  Historical cost is always irrelevant.

Is the high price due to supplier gouging?  Not at all.  If you want to blame anyone for the high price blame your fellow buyers not the suppliers.  A high price means that some other buyer is outbidding you to obtain the limited supply.  It’s buyers who push up prices in a competitive market and it’s suppliers who push prices down!