Monday, August 18, 2003

In praise of price gauging.

Phoenix is in the middle of a gas crisis. Reminiscent of the 70's embargo, there are lines 20-30 cars deep at gases that have gas. Most stations don't even have gas.

The problem is a pipeline breaking down north of Tucson. The pipeline has been repaired, but we are waiting on the Feds to approve testing on the repairs. So currently the gas is being trucked in. Apparently there aren't enough trucks to fill everyone up.

Anyway, the prices have gone up to almost 2.15, even 2.50, a gallon. I am not psyched about paying such high prices, but the higher they go, the quicker the crisis will be over.

Of course the state officials have all said they will investigate and prosecute and price gauging. This is silly. Let the stations gauge and charge as much as they get. This will have the effect of bringing more gas to the market (suppliers in search of profit). And it will also curb peoples driving resulting in more gas available.

Bring on the gauging and end the gas crisis.

Sunday, August 17, 2003

The blackout has past, but the commentary on continues to flow. One of the main bits of comments floating around is this idea that the blackout was the result of deregulation. This really bugs me. There was no deregulation in the '65 or '77 blackout. It's not as if a fully regulated system is able to prevent such a massive blackout, so its really disingenous to claim that this blackout was a result of deregulation.

I think, one might make the argument that this shows that deregulation and privatization of the electric system is even more needed.

Let's remember that while there has been some deregulation, it is hardly a free-market system. The federal and state government still controls many if not most of the aspects of the generation and distribution of electricity.

The infrastructure of the power system has not been upgraded primarily because of the high cost and lack of investment in this part of the system. Why is it like that? Because this part of the system is, if I understand it correctly, still heavily regulated and the profit margin in this area is very small and so investers aren't willing to put their money there.

There is also a tragedy of the commons here with everyone wanting the upgrades, but no one thinks they should foot the full bill for it and everyone using the system and trying to get as much out of as possible.

In a free system, I think, black outs would less common because of more competition and more investment in infrastructure.

Check out this link for more information on the black out:
Reason Public Policy Institute: Blackout Resource Center

More information on privatization of the electric system:
Electricity Competition Center