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Angst Aside, Gouging Story Fails Econ 101

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By TOM JACKSON

The Tampa Tribune

Published: September 17, 2008

Recalled, dimly, from a lifetime reading comic strips in the daily paper, a panel in which a pair of aspiring entrepreneurs - Calvin and Hobbes? Dennis and Ruff? - set up a stand for selling apples. The price is exorbitant, maybe $100 an apple.

The pair's foil, a neighborhood girl, arrives. Eyes pop. Blurts, "Who's gonna pay $100 for an apple?"

"I dunno," winks one of the young businessmen, "but we only have to sell one."

This lesson in gonzo economics emerges from the goo of my memory whenever the dutiful folks in Tallahassee announce the inevitable probe of pricing activities that attend tropical weather events. Intolerable! declare the gouge-busters. Unconscionable!

Monday, aroused by the state's price-gouge hot line going radioactive, the governor, attorney general and agriculture/consumer commissioner mobilized into a single avenging unit. Their target: gas stations posting abnormally high prices and the oil companies that supply them.

Galvanizing their resolve: Pictures such as the one in Sunday's Tribune and on TBO.com memorializing the sign at the San Antonio Flying J as one of the truck stop's highwaymen perpetrated a daylight robbery ... or so goes conventional wisdom.

To wit: For no other reason than to line the pockets of the owner (small-business chieftains notoriously resisting trickle-down practices), the Flying J apparently rounded up motorists traveling Interstate 75 and forced them to fork over $4.58 for a gallon of unleaded regular. State investigators are running down reports that victims who paid ever-so-dearly at the pump were greeted by a message that blinked malevolently, "Stick 'em up."

Gouging, Or Bad Business?

Never mind that anyone paying the Flying J's inflated price with cheaper options available merely confirmed the aphorism widely credited to P.T. Barnum measuring the interval separating the births of suckers.

Never mind that the Flying J's prices slipped to more reasonable levels hours later. Never mind the reason for the retreat, either, that other stations in the region declined the invitation to gouge, gouge, gouge, instead choosing to siphon off the J's customer base.

The marketplace did what the marketplace does when competitors abound and government dilettantes keep their noses out: Prices balanced where supply met demand. Rather than perch way out on a limb of bad business practices, the Flying J capitulated. By noon Tuesday, it was one of central Pasco's low-price leaders, offering unleaded regular for $3.79 per; nearby, beneath a sign asking $3.95 for the same stuff, Citgo's fuel plaza sat vacant.

Recklessly Forgetting The '70s

Wait. They're hiking the prices for stuff stored in their tanks. That can't be right. Ah, but those tanks aren't bottomless. Among the forces driving the pump price is an expectation of what refilling them will cost.

The alternative invites a replay of the hair-brained 1970s, when government crusaders clamped down on the pump price, resulting not in happy motorists but, instead, in lines extending to next Tuesday and supply tanks that ran dry.

Alas, memory fades and populist politicians playing to the public's economic ignorance jab accusing fingers dripping with cynicism: "Gouger!" Yeah, tell it to Calvin and Hobbes.

Columnist Tom Jackson can be reached at (813) 948-4219.

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