The Great Sonny Perdue Gas Debacle of 2008

Now that the crisis is easing, who is to blame for the great gasoline shortage of 2008? Well, let’s think about that from the economic perspective of basic supply and demand.

Gov. Sonny Perdue signed an executive order on Sept. 12 enacting Georgia’s gas-gouging statute. The executive order meant that gasoline stations could only raise their price per gallon to reflect an increase in their costs per gallon; they could not increase their price to make bigger profits. Moreover, the Governor’s Office of Consumer Affairs recently subpoenaed sales records from 130 gas stations to determine if they illegally raised prices after Hurricane Ike. What would you have done if you were in the gasoline business? You would not raise your sales price.

What happened then? There was not as much gasoline to go around as before the hurricane, but there was still plenty of gasoline. There was no shortage in Oregon, in Wisconsin, in Ohio. Let’s say that you owned a company that delivered gasoline. Say you owned 5,000 trucks. Now let’s say that you could have gotten $6, $7 or $8 per gallon in Atlanta, but only $4 or $5 in Oregon, Wisconsin or Ohio. In other words, you could have made big profits in Atlanta. Don’t you think you might have diverted some of your trucks to Atlanta?

But what if you could have gotten only $4 per gallon in Atlanta, about the same as in Oregon, Wisconsin or Ohio? Was it worth it to divert some of your trucks from their regular routes? Of course not! No big profits meant no gasoline trucks driving to Atlanta. Is this all becoming clearer? Perdue and his consumer affairs office decided to play God with the price of gasoline so Atlanta didn’t receive needed gasoline supplies.

That’s the supply side. Now let’s think about the demand side. There was not enough gasoline around town to match the amount the buyers would like to buy at $4 a gallon, but there was enough to match the amount people would buy at $6, $7 or $8 dollars a gallon. People were exactly right to line up and top off their tanks. There was not enough gasoline to go around because the price was stuck at $4 a gallon!

At $4 a gallon, I was still taking my usual Sunday drive to the mountains and all of you were still taking your football trips or whatever you do, if you could find gasoline. But some of you could not get to work. At $8 a gallon, however, I would not take my Sunday drive and others would cut back, too. The gasoline that we did not use would have been there for the rest of you to get to work. There would have been no need to top off our tanks because there would have been no shortage.

Would it have been terrible to pay $8 for a gallon of gasoline in the short term? Well, two weeks ago, if I were to have offered you $8 to sit in a car line for two hours you probably would have told me your time was worth more than that.

So you decide: would you rather let the price go up to its natural level and not have to spend five or six hours per week searching and waiting for gasoline, or do you like the Perdue way of controlling how gasoline is distributed in Atlanta?

Who is to blame for the great gasoline shortage of 2008? The Georgia voter need look no farther than the mirror. When naive voters vote for naive government leaders, they get naive government policies and suffer the consequences. On the other hand, the Georgia resident need not feel too ashamed —- North Carolina, Tennessee and Alabama voters are no smarter, as they have similar, silly gas-gouging laws on their books. Of course, they have shortages, too.

> Luc Noiset is associate economics professor at the Michael J. Coles College of Business at Kennesaw State University. These are his personal views.