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How to solve the fuel crisis The rational answer is to allow petrol stations to charge more

THERE ARE NO PETROL SHORTAGES. REPEAT THERE ARE NO PETROL SHORTAGES. Credit: Darren Staples/Bloomberg/Getty

THERE ARE NO PETROL SHORTAGES. REPEAT THERE ARE NO PETROL SHORTAGES. Credit: Darren Staples/Bloomberg/Getty


September 28, 2021   6 mins

I have a full tank of petrol. I’m reluctant to advertise the fact, in case gangs of Mad Max-style marauders turn up at my front door with machetes and a siphon, but we got lucky: we happened to fill up midweek. Still, though, we got caught up in huge traffic jams over the weekend, because people were queuing down the road from every petrol station we passed.

There’s been a lot of talk of “panic buying”, but that’s not what it is. It’s straightforward rational behaviour. If you know that you need petrol, and you know that petrol stations are likely to run out of petrol, then it is entirely rational to get to the petrol station as quickly as possible and buy as much as you can fit in your tank.

The trouble is that it’s also rational for everyone else to do the same thing. So you end up with everyone blaming everyone else for being selfish, while insisting that they have excellent reasons for needing the petrol right now. You’re not stuck in traffic, you are traffic. It’s the exact situation we had with toilet rolls and Calpol in March 2020.

Over the long run, the market normally solves coordination problems like this, reasonably effectively. If lots of people want some resource, then the people selling that resource realise they can make more money if they raise the price. At the higher price, fewer people are willing to buy it, but the seller makes more money per unit sold. And, in theory, they can keep raising the price until the lost sales start to outweigh the gain per unit.

This is completely normal. Try going to Center Parcs in term-time, and you’ll find that you only need to sell one kidney for four nights. Try going in half term, and you’ll be harvesting organs from your entire street. More people want to go on the rubber-ring flumes during school holidays, so the company can charge more money for it. This is how the economy works, and normally we’re broadly OK with it apart from the occasional communist revolution.

But when companies try to raise their prices during an emergency, we call it “price gouging” and we’re really against it.

In some places, in fact, including many states in the US, it’s literally illegal. In Mississippi, for instance, there is a provision in the law that when an emergency is declared, you’re not allowed to put prices up: “the value received for all goods and services sold within the designated emergency impact area shall not exceed the prices ordinarily charged”.

This leads to some strange situations. In 2005, in the aftermath of Hurricane Katrina, a Kentucky man named Jim Shepperson bought 19 generators, and drove them 600 miles to a part of Mississippi that had suffered power outages. He rightly thought that people would be eager to buy them at twice the price he had paid for them. Instead, though, the police confiscated his generators, and threw him in jail for four days. So no one got the generators and he didn’t get the money. It’s a nice example of the Copenhagen Interpretation of Ethics: as soon as you do anything to help solve a problem, you can be blamed for not doing more.

In the UK, we don’t have price-gouging laws. But there is a strong resistance to the idea. Last year, when masks, hand sanitiser, toilet paper, paracetamol and so on were all in short supply, various retail groups put out a statement condemning price gouging: “Those who inflate prices to profit off the backs of their customers are adding to their distress at a time of particular vulnerability.”

The funny thing, though, is that most economists would tell you that price gouging is — on balance — a good thing. When asked whether “surge pricing”, increasing prices during periods of increased demand — as Uber does — increases the supply of those goods, most economists said yes. When asked whether Connecticut should ban price gouging in natural disasters, most economists said no.

That might sound strange. Jacking up prices in an emergency sounds immoral — you’re taking advantage of people’s desperation. Poor people won’t be able to afford the goods. Most people have a strong intuition that you shouldn’t be allowed to push prices up.

But look at the effects. First, if costs are artificially low — if a product is available at a cost much lower than customers are willing to pay — then it becomes rational for customers to stockpile those products. If I know that people are going to buy all the toilet paper at the store, and the toilet paper is still 50p a roll, then I can easily buy 100 rolls for £50 and stick them in the back of my people-carrier. If, however, the cost of a toilet roll had jumped to £5 a roll, I’d be much warier, and so there would probably still be toilet paper for the next person to buy. Instead, I’ve bought it all. If it was appropriately priced, it wouldn’t be so likely to run out.

Second, appropriate pricing tends to put goods where they’re most needed. People who really need that product — in the case of petrol, people who definitely need to get to work, or to visit a distant relative, or whatever — will be willing to pay more than people who are simply worried that they might have to drive next week some time. When pricing is artificially fixed, goods will tend to end up with whoever happens to get there first, rather than the people for whom they’ll do the most good.

Third, retailers respond to incentives too. If they know they can make a decent profit on some good, then they will bring it where it’s needed. John Shepperson, the guy with the generators, wouldn’t have bothered bringing those generators if he could only get what he paid for them. (Maybe he should have driven 1,200 miles to sell them at cost, but since no one else brought any generators at all, it still seems better that he brought them.) They might also stock up on goods when they’re cheap, against the possibility that there will be some time in the future when they can sell them at a higher price.

And some emergencies are foreseeable, to an extent. As Amihai Glazer, an economist at the University of California, Irvine, says, if a retailer knows a week in advance that there’s a snowstorm coming, they might order loads of snow shovels, because they know they’ll be able to sell them at a higher price. But if they expect price controls, they will have less reason to do so. So fewer people end up with snow shovels than would otherwise get them, and you get queues, rationing and shortages.

The obvious objection is that, if you raise prices, poor people are less able to afford the new higher prices than rich people. That is undoubtedly true. I said earlier that if prices go up, goods will tend to go to the people who need them most — and that’s true, all else being equal. But all else is not equal. Some people are simply much more able to pay.

But it’s not clear that poor people are any better off under the current system. In the case of toilet roll, for instance, I can afford to drive to the shop in my large car and pay £50 upfront for toilet roll, so I have loads. Someone who is poorer, who has to walk or take the bus, and only has £5 or so that they can spare, will not be able to stockpile. They might have much less spare time. In the case of queuing for goods, a rich person could pay someone to queue for them, as purportedly happened in the 1973 oil embargo (there were even reports of people offering sexual favours in return for petrol), or pay for childcare while they queue themselves.

What might work better would be allowing price gouging, but subsidising goods for poorer people — people who are on housing benefit or whose children qualify for free school meals, for instance, could be given vouchers. In general, it’s a reason to aim for a more equitable society, make it so there are fewer people who can’t afford a £5 toilet roll, rather than to try to patch the problem in the moment of crisis.

There are lots of other reasons why prices might not be easy to change at short notice — why they’re “sticky” — and laws against price-gouging certainly aren’t the whole story. In the UK, as I mentioned, we don’t have price-gouging laws. But the strong social norms against price gouging have much the same effect. I spoke to someone who works in supply chain logistics for major British retail firms, and they said that it’s a brand reputation issue.

That is: you spend years building up a reputation for value and fairness, and for encouraging people to shop with you rather than elsewhere, and that reputation is worth far more to you than the quick buck you could make by jacking prices up for short-term profit.

This sounds good — firms don’t want to make a short-term profit at the cost of customer reputation! — but it has the same effect as legislation. Prices that should go up don’t, so stores don’t stock extra, people stockpile, and goods don’t end up where they’re most needed.

It’s much harder to change public attitudes than it is to change legislation. But it’s not impossible. As Rob Wiblin, an economist and the director of research at the charity 80,000 Hours, told me, flight prices used to be fixed. Many countries deregulated their air industries in the 1970s and 1980, and now, we’re entirely used to rapidly fluctuating prices — even between two clicks on the same website. It doesn’t bother us all that much. Public attitudes are somewhat malleable.

But maybe they aren’t so malleable that we could come to accept someone charging £5 for a face mask during a pandemic — it feels immoral, at a time when we feel like we should all be coming together. Most people would probably find it disgusting, as they did when hotels increased their prices after the 7/7 bombings when thousands of people were stuck in London. But what we find disgusting is not always a good guide to what is moral, or for that matter what is effective. It might be worth changing our attitude.

Because if we can change our attitude, it would probably do us all good, especially if we combined it with sensible ways of subsidising the purchasing power of poorer people. Price-gouging has a bad name — literally — but it’s not always a bad thing. Now, if you’ll excuse me, I need to start fighting off gangs of road warriors on the streets of Haringey, because the local petrol stations haven’t price-gouged enough.


Tom Chivers is a science writer. His second book, How to Read Numbers, is out now.

TomChivers

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AC Harper
AC Harper
2 years ago

An alternative to subsidising the poor, which I suspect would be costly and bureaucratic, would be rationing at the pump or till.
A 15 litre limit on fuels would dampen the desire to fill up. The poor would get fuel, and high mileage drivers (who might also be poor) would have to drive around several garages to get enough for their projected mileage.
Many supermarkets put a limit on how many toilet rolls a customer could buy in the early days of the pandemic, so it can be done.

A Spetzari
A Spetzari
2 years ago
Reply to  AC Harper

This strikes me as a far simpler and effective method all round. You running for election anytime soon?

Brendan O'Leary
Brendan O'Leary
2 years ago
Reply to  AC Harper

Yes, it can be done without government mandating it, as the supermarkets showed.

rodney foy
rodney foy
2 years ago

Yes, the government should probably keep out of it, and consult Tom

rodney foy
rodney foy
2 years ago
Reply to  AC Harper

Yes, I was surprised Tom didn’t analyse rationing, and any unintended consequences. Still, a fascinating article

Brendan O'Leary
Brendan O'Leary
2 years ago
Reply to  rodney foy

Rationing is simply the flipside of the price control coin.

Jon Redman
Jon Redman
2 years ago
Reply to  AC Harper

That’s a socialist solution though. If you ration the supply and fix the price of something that is in short supply, there is no incentive to bring more of it in. Suppliers can neither sell more nor respond to the price signal by charging more. The result is either a continuing shortage of everything (eg the USSR) and / or a black market (eg the USSR) in which the good trades at whatever it’s worth to the marginal buyer, and everybody else queues for hours to get any at all.
It’s not an accident that rationing continued for 6 years in Britain after WW2. It was socialism at work. If you’d been allowed to sell eg sugar at whatever price you could get for it, the price would have risen so high that supplies would have flooded in to cash in. Thus the shortage would have been eliminated, the previous price restored, and a good few late-to-the-party speculators mullered. Meanwhile, if you didn’t really need sugar, you wouldn’t have bought any. What’s not to like? Instead it was doled out by the state in a way that ensured shortages continued.
Price elasticity is a good thing. This weekend I had to buy 2 tankfuls of petrol to take the kid to university 250 miles away. I’d have done that no matter what the cost; meanwhile wifey would have walked (wherever she needed to go locally) rather than pay silly money for petrol she didn’t really need.

Last edited 2 years ago by Jon Redman
AC Harper
AC Harper
2 years ago
Reply to  Jon Redman

But the point with the current fuel ‘crisis’ is that fuel isn’t in short supply. Unjustified panic hit and worsened a distribution problem, and rationing would be a temporary solution.

Jon Redman
Jon Redman
2 years ago
Reply to  AC Harper

Of course it’s in short supply. Have you looked at any petrol stations?
You can squeeze the means of delivery of something as well as the physical supply. If the supply is at fuel terminals and there aren’t enough drivers to get it to petrol stations there’s a supply shortage.

D Glover
D Glover
2 years ago
Reply to  Jon Redman

There are the same number of tanker drivers today as one month ago. The supply is normal, it’s demand that spiked. AC Harper is right.

Doug Pingel
Doug Pingel
2 years ago
Reply to  D Glover

Um. Maybe not. I was a truck owner/driver for the last 12 years of my working life and I still know people in that trade. I have had 2 (unconfirmed) reports of ADR drivers, thinking that they were going to work a full week being laid-off. I’m not normally one to believe in conspiracy theories but that would fit in with the idea of the RHA leaking privileged info to spook the government into letting their members bring in cheaper drivers from abroad.

D Glover
D Glover
2 years ago
Reply to  Doug Pingel

Thanks for that. I stand corrected.

hugh bennett
hugh bennett
2 years ago
Reply to  Doug Pingel

yep, and add in that its the Labour Party conference !!

Niobe Hunter
Niobe Hunter
2 years ago
Reply to  D Glover

And once all the people who have filled up, when they might normally put £20 in, the ‘problem’ will resolve itself. Unless the lunatics with plastic bottles are allowed to continue what is already an illegal ( and stunningly dangerous) practice.

D Glover
D Glover
2 years ago
Reply to  D Glover

Deleted

Last edited 2 years ago by D Glover
Jon Redman
Jon Redman
2 years ago
Reply to  D Glover

Demand’s only spiked on the back of a perceived shortage though, so it’s a bit chicken and egg at minimum.

Andrew Fisher
Andrew Fisher
2 years ago
Reply to  D Glover

Demand is exceeding supply, for whatever reason(s). People and society are complex, and economic fluctuations happen for many reasons. Neither you nor I ‘really’ know exactly why this is happening now. These arguments are some of the main reasons, among many, for a decentralised market economy. You argue like a socialist, the economy is a fixed size, we just need to divide it up. Which has always proved an utterly woeful ‘solution’ to shortages.

Supply and demand are both equally important. Allowing prices to rise would be by far the most effective solution.

Last edited 2 years ago by Andrew Fisher
Brendan O'Leary
Brendan O'Leary
2 years ago
Reply to  AC Harper

Deleted

Last edited 2 years ago by Brendan O'Leary
rodney foy
rodney foy
2 years ago
Reply to  AC Harper

Yep, but I tend to go along with individual petrol stations rationing, rather than the government

Ferrusian Gambit
Ferrusian Gambit
2 years ago
Reply to  AC Harper

Allowing prices to rise strikes me as far more effective way to ward off panic buying than rationing that
a) has the effect of announcing a shortage
so
b) people will start to stockpile in the blackmarket.
c) disincentivises suppliers to bring in more supply to relieve the crisis
That said there seem to be a lot of people here who seem stuck in antediluvian concepts of ‘fair price’ who have no concept of supply and demand.

Last edited 2 years ago by Ferrusian Gambit
John Riordan
John Riordan
2 years ago

“That said there seem to be a lot of people here who seem stuck in antediluvian concepts of ‘fair price’ who have no concept of supply and demand.”

Exactly. We could have introduced a “fair price” for houses, but it would simply have resulted in more people living in cardboard boxes. Most people who confuse economics with social justice don’t know they’re born, quite frankly.

Juliet Garnett
Juliet Garnett
2 years ago

Disagree with ‘c’. Supermarkets, for example, continually reduce/increase the price of goods. At such times they could fairly sell items in demand at the full/higher price charged previously. Selling vast quantities above average would increase their revenue substantially & while selling less than they normally would for a while post ’emergency’ may see some balancing they would still have benefitted overall bec a) the higher price would have been charged for longer, and b) they would have no doubt earned interest on the increased revenue in the interim.
Also, the supermarkets with items to sell throughout will attract customers who may buy other things. The shops without desired items will lose out. Lastly, those that recognise they have a duty to provide necessary products to their loyal customers will probably benefit from that also.
This said, I think your disparaging comments re those of us who agree to some degree/in some instances for fair pricing controls, actually apply to you. It’s been obvious for decades that big business knows full well how to ‘play’ the system for their own benefit such that supply/demand rarely works as intended.

Last edited 2 years ago by Juliet Garnett
Judy Johnson
Judy Johnson
2 years ago
Reply to  AC Harper

Yes, you are right. Now so many people have full tanks that will take time to empty, there should be fule for those driving longer distances.

Andrew Fisher
Andrew Fisher
2 years ago
Reply to  AC Harper

It is in short supply if demand exceeds supply, by definition!

Julia H
Julia H
2 years ago
Reply to  AC Harper

An alternative to rationing would be to charge a minimum of, say, ÂŁ50, irrespective of how much fuel is pumped into the tank. That would deter the panic topping up of a mostly full tank and ensure that only people with that much capacity in their tank arrived at the pumps.

Brendan O'Leary
Brendan O'Leary
2 years ago
Reply to  Jon Redman

Is your wife a member of The Proclaimers?

Hosias Kermode
Hosias Kermode
2 years ago
Reply to  Jon Redman

“wifey”?

chris sullivan
chris sullivan
2 years ago
Reply to  Hosias Kermode

I agree- if I had written that and my wife had seen it life would have gotten veeery frosty !

chris sullivan
chris sullivan
2 years ago
Reply to  Jon Redman

I am interested in your rationale here (vs your wife’s) – you mean your child could not have taken the bus ? or was anxious ? or overly ‘entitled” ?? My child would have not thought twice about taking 3 buses so ??? what was going on there (a bit important i think in these times of ‘extra’ challenges )

Jon Redman
Jon Redman
2 years ago
Reply to  chris sullivan

No, simply that there was no other way to get sproglet and (all her stuff) to university than to use a car. Ergo even if it was ÂŁ10 a litre I’d have paid it, as it was necessary.
The missus in contrast stayed home and had no errands to run that could not be done on foot. So that’s what she did, she didn’t bother queueing for petrol nor would she have bought any had it been queue-free but (and because) ÂŁ10 a litre. Nor would many other people so before very long the price would have subsided.

Sheridan G
Sheridan G
2 years ago
Reply to  AC Harper

Not all petrol stations would put up prices: those in urgent need could pay more more to take what they need at a shorter queue, others less urgent might fill up for less cost after a wait. In fact this system could work in some individual forecourts.

Jon Redman
Jon Redman
2 years ago
Reply to  Sheridan G

Right, you could have a ÂŁ10 a litre pump and a ÂŁ1.35 a litre pump. If you don’t want to queue you’d go to the former.

JR Stoker
JR Stoker
2 years ago
Reply to  AC Harper

Maybe. 15 litres would not get anybody very far and so a significant part of the fill up would be used driving round look for more. As some body says elsewhere, make it a minimum 30 litre fill up and stop people driving round putting risible amounts in the tank, “just in case”

Judy Johnson
Judy Johnson
2 years ago
Reply to  AC Harper

This is a good idea but might not work on the motorways where people drive long distances.

Fennie Strange
Fennie Strange
2 years ago
Reply to  AC Harper

It’s easy to count loo rolls and for the cashier to say “Sorry, you can only have four”, but that doesn’t work with fuel pumps. What can the cashier do? Ask for some of it to be put back?

Last edited 2 years ago by Fennie Strange
Andrew Horsman
Andrew Horsman
2 years ago
Reply to  Fennie Strange

Ooh, maybe a neat, clever solution to that little conundrum is a state-run digital wallet and associated ID that only allows you to fill up with a specified amount of petrol, or maybe a little more if you have been a good little boy or girl?

Now, what kins of diabolical megalomaniac want to put that sort of thing on to the agenda for public debate?

Andrew Horsman
Andrew Horsman
2 years ago
Reply to  AC Harper

Maybe the government is trying to provoke sensible people to advocate rationing, because that is how they can attempt to cajole us on to digital IDs that they control? A thought to ponder, perhaps?

Andrew Fisher
Andrew Fisher
2 years ago
Reply to  AC Harper

That is what is happening, but it is a much cruder, indeed, socialist solution than market pricing would be. Who says the ‘need’ for that petrol is equal and exactly 15 litres? Some people require much more, they drive for a living for example, and others much less, for example they live in London, drive for convenience but have a good public transport system they can use if necessary.

Last edited 2 years ago by Andrew Fisher
Alan Hawkes
Alan Hawkes
2 years ago
Reply to  AC Harper

Do the really poor have cars?

Ailsa Roddie
Ailsa Roddie
2 years ago
Reply to  AC Harper

Have I missed something? This isn’t as good a solution because while it offers some protection to buyers sellers don’t get the right incentives!

Richard Lyon
Richard Lyon
2 years ago

Allowing petrol stations to charge more no doubt suits those who have enjoyed the last 18 months in splendid indolence zooming each other, watching Netflix, munching Roses, and accumulating furlough in their bank accounts.
As someone with now almost exhausted savings who has been unemployed, without furlough, and without unemployment or housing benefits for the last 18 months, and who now needs a car to get to the nearest available work – bit less keen. It’s been bad enough watching the furloughed cheering on these lockdown arrangements. Watching them drive around while I cycle 8 miles each way to work in the early morning darkness trying to avoid getting killed by them just adds injury to insult.
Thanks, though, Tom, for your startlingly tone deaf proposal.

Last edited 2 years ago by Richard Lyon
Douglas Proudfoot
Douglas Proudfoot
2 years ago
Reply to  Richard Lyon

First the government created the problem with ineffective lockdowns that killed the economy, without any effect on Covid-19. The government expands its powers by jawboning petrol prices, creating shortages by forcing petrol prices artificially lower, creating shortages, but telling the people they put out of work that the government is helping them with low petrol prices.
People who vote for such governments, deserve all the failed socialism they can get. Remember, socialism is the trick that never works!

Norman Powers
Norman Powers
2 years ago

Great article. I agree with every word of this. Bizarre unpredictable shortages are usually traceable to socialist laws or attitudes, and I hadn’t considered the UK reputation angle before.

I guess the root cause of this is a lack of political parties will are willing to fully commit to making the case for capitalism. The Tories simply triangulate to whatever seems like a vote winner at the time and mostly drift along with other people’s ideas.. The left does still argue for socialism, albeit in a messy way. The UK badly needs an organized libertarian party to put pressure on the Tories from the right economically, not just on cultural issues.

Last edited 2 years ago by Norman Powers
John Riordan
John Riordan
2 years ago
Reply to  Norman Powers

Good point: this is the one thing that economists will say is an iron law of economics possessing experimental testability: economists know how to produce a shortage of something upon demand, should such an outcome ever be demanded.

Andrew Wise
Andrew Wise
2 years ago
Reply to  Norman Powers

Put a price cap on household fuel bills to protect the poor and all the providers go bust, costing the poor more in the long run 🙂

John Riordan
John Riordan
2 years ago

Excellent article. The part about how hard it its to change attitudes towards economic rationality reminds me of a debate online I was involved in a few years back when interest rates were being discussed, particularly their relationship with risk, and how different banking customers would encounter different interest rates as a consequence of possessing varying credit ratings.

The debate, predictably, divided people along the left/right faultline, with the left hand side not merely disagreeing that the practice was fair, but being completely unable to see that their own suggestions couldn’t possibly work. The general view was that the banks ought to be forced to give the most advantageous interest rates to those with the worst credit profiles, and to charge the people with the best profiles the highest interest rates.

What do you think the people with the best credit histories do in response? What does the bank do when all its loan customers are people with a track record of default and they’re paying less interest than needed to cover default risk? What happened when the US government tried something similar in the 1990s? All these questions remained unanswered, because the issue was not a commercial issue with complex considerations and dangerous potential side-effects for those taking that view, it was a simple social justice issue with a simplistic social justice answer.

Last edited 2 years ago by John Riordan
Brendan O'Leary
Brendan O'Leary
2 years ago
Reply to  John Riordan

It’s considered Extreme Far Right these days to even entertain the thought that government-urged “fair” loan policies sowed the seeds of the subprime crash.

Andrew McDonald
Andrew McDonald
2 years ago

Is it? I thought that the US govt not only ‘urged’ but actually made it legally obligatory for their captive loan institutions to socialise their home loan policies, and that this is common knowledge (or at least accepted folklore) in centrist circles. I must be a lot further along to the right of the spectrum than I thought!

Brendan O'Leary
Brendan O'Leary
2 years ago

I thought it was accepted too, but I got called all sorts of names on social media for even suggesting the “urging” which is why I phrased it so cautiously this time.

Andrew McDonald
Andrew McDonald
2 years ago

Fair point. I was called a Commie here on UnHerd the other day for similar crimes.

John Riordan
John Riordan
2 years ago

The Clinton government did indeed mandate credit availability to people with poor credit histories. The price of achieving this enormous intervention into markets was that the banks refused to water down their lending criteria unless they were underwritten for the inevitable losses, to which the government expressly agreed. That’s how Fannie May and Freddie Mac ended up bailing out the banks, which meant in reality that the taxpayer bailed out the banks. Describing any of this as market failure is about as thickheadedly stupid as you can get without people around you wondering if you’re safe to be out unaccompanied, in my view.

It is true that the banks then took advantage of the the fact that the entire investment banking industry could spread risk onto those areas of western economies possessing the implicit taxpayer guarantee in question, and that is certainly something for which the private sector can be fairly blamed. But why then, in 2009, did a series of liberal-left western governments choose the path of bailing out the entire banking system unconditionally, even though it was readily apparent that the people that benefitted the most were rich bankers effectively gambling with other people’s money? That’s not market failure, it’s government failure.

Last edited 2 years ago by John Riordan
Warren T
Warren T
2 years ago
Reply to  John Riordan

Precisely!

chris sullivan
chris sullivan
2 years ago
Reply to  Warren T

Damn straight – and is it any wonder that the ‘have nots’ of this world are rising up in disgust at all these scumbags and voting for who knows what.

Jon Redman
Jon Redman
2 years ago

It’s called price elasticity and it’s quite well understood. The price of domestic gas is elastic: you’ll heat your home no matter what the cost. The price of a Ford car is inelastic: there’s nothing it does better than a Vauxhall so its price can’t be much different.
When it gets interesting is when green policies cause us to run out of gas and power. Either rationing or surge pricing will be required, which is of course the agenda behind “smart” meters: one day your electricity supplier will be able to turn off your central heating because it doesn’t agree you need it.

Cheryl Jones
Cheryl Jones
2 years ago

Frankly with one made-up crisis after another I can’t but help but think there is some deliberate manufacturing of crisis going on – and I never really noticed it until 24th June 2016 when it went into overdrive. Anything the ‘establishment’ can do (and it’s a weird idea to think that the, establishment ISN’T actually the Tories) to run down this country, its people and its democratic choices, are taken with glee. I always note how people just say things like ‘Tories are scum, evil, Nazis and want to kill old and disabled people’ and ‘anyone who votes Tory is an unreconstructed thick, racist, moron’ entirely without self awareness, nuance or concept at the massive complexities involved, and they say it without challenge like it’s just an undisputed fact, well it staggers me frankly. I have so many questions about things going on, and how they are reported, and nowhere to go for what I would call objective journalism. I’m sure it wasn’t always like this. What the hell happened, did I just get old? Was it always like this and I just didn’t see it??? Or is it just a symptom of our overcrowded airwaves where everyone has a ‘voice’ and the noise has just become too much for my puny human brain to cope?

Douglas Proudfoot
Douglas Proudfoot
2 years ago
Reply to  Cheryl Jones

Here in the US, news and social media are a privatized Ministry of Truth. This started in 2016 with the Russian Collusion Hoax. Journalists became activist Democrats, with no efforts to hide biased coverage and lies.
The height of censorship occurred in October, 2020, when the New York Post broke the story of Hunter Biden’s laptop. Emails on the laptop revealed that Hunter Biden sold access to his father, and took poorly camouflaged bribes from Russian and Chinese businesses.
Twitter and Facebook didn’t allow any links to the story to be published on their platforms. Mainstream news media said the laptop, even though at bad thousands of Hunter Biden’s pictures, texts ad emails on it, was Russian disinformation. The repair order signed by Hunter Biden wasn’t mentioned. The New York Post was locked out of its Twitter account for over a month, until the election was over.
Private companies in the US claim 1st Amendment Free Speech only applies to government, not private companies. The effect is that on line speech is heavily censored for political content in the US, including comment sections of publications like the Wall Street Journal. Only independent web sites report uncensored news and allow politically incorrect comments. That’s why I’m here.

Andy Moore
Andy Moore
2 years ago

Although I agree with the main thrust of the article, I disagree to the use of the current fuel crisis as an example. From the various sources that I’ve listened to there was next to zero likely hood of fuel running out. The empty pumps which we have now is down to people being irrational not rational, this will be reinforced over the coming days when things get back to normal with zero changes being made.

Andrew McDonald
Andrew McDonald
2 years ago
Reply to  Andy Moore

Agree. BP last Thursday reported 1% of their stations closed, a further 5-10% with some shortages; 48 hours later 35% closed. Throughout that period, zero shortages in the underlying stocks. Irrational behaviour on the consumers’ part.

John Riordan
John Riordan
2 years ago
Reply to  Andy Moore

Quite right. I haven’t queued for fuel, I have half a tank of diesel from my fill about 2weeks ago, or about 300miles worth. I usually fill up once a month and that means I’ll simply fill up in about 2 weeks without having to queue.

Obviously if I had a job requiring regular mileage then that would be a different matter, but here’s the thing: lots of people who need fuel for that good reason presently can’t buy any, because idiots who don’t actually need to go anywhere have gone and panic-bought a load of fuel for no better reason than just to have it.

Last edited 2 years ago by John Riordan
Allie McBeth
Allie McBeth
2 years ago
Reply to  John Riordan

Often filling jerry cans to store in their garages..

Jon Redman
Jon Redman
2 years ago
Reply to  Allie McBeth

Which is quite possibly in breach of their home insurance policies, which often do not allow storage explosive or flammable substances.

Ferrusian Gambit
Ferrusian Gambit
2 years ago
Reply to  Andy Moore

Rising prices though mean people have to pay for their rationality which, ceteris paribus, is a good thing.

Jean Nutley
Jean Nutley
2 years ago
Reply to  Andy Moore

A true story from the pumps, as told to my daughter by the petrol pump attendant/ cashier. The queue was a bout a thousand cars long, no exaggeration. An elderly lady wanted her tank filled up, even though it was over three quarters full. After being served she confided, “I only use my car once a week”.

Christopher Barclay
Christopher Barclay
2 years ago

The petrol ‘crisis’ is about two conflicting ideas as to how the market can resolve the difference between the demand and supply of petrol tank drivers. The government wanted the petrol companies to offer higher pay and train more drivers. The petrol companies wanted the government to allow in drivers from abroad so that wages could be kept low.

Zorro Tomorrow
Zorro Tomorrow
2 years ago

The media said ‘Don’t panic!’ A signal dim people were bound to ignore. I hope we never have a real crisis.

Hilary Easton
Hilary Easton
2 years ago
Reply to  Zorro Tomorrow

I don’t think people panicked, as it says in the article they just behaved rationally in topping up a little earlier than they would have done otherwise, in consideration of a shortage that had been flagged up, in order to make their normal, necessary journeys to work and so on.

Francisco Menezes
Francisco Menezes
2 years ago

How about paying lorry drivers a decent salary? EU import of workers is the equivalent of 19th century Irish miners imported to break strikes. This is a manufactured crisis which can be easily solved by training British citizens to become lorry drivers and pay them decent wages. How long does it take to obtain a driver’s license? That is a matter of months, and the problem is solved. The privileged bullshit job elites have found another way of importing cheap labour. The Democrats actually are openly admitting it. We need open borders because of the cheap labour. Destroy the education system, lay everyone off and let the imported slaves do the work for the diversity and inclusivity nobility. Who doesn’ t want to hit the maid if she has broken a saucer? Of course, working for a pittance, because being Polish is just as bad as being working class. Perhaps Karl Marx’ idea of revolution in Brittain will come 200 years later than expected.

Tony Taylor
Tony Taylor
2 years ago

In Perth in 1986 a petrol company, Povey Petroleum, offered petrol at 1 cent/litre. Cars were banked up for kilometres waiting to score the bargain. It never seemed to bother anyone that they had to wait all day for a total saving of maybe $50.
Anyway, come the 1987 crash, Povey went bust.

Tim Bartlett
Tim Bartlett
2 years ago
Reply to  Tony Taylor

I get up early in the morning. One day in the UK the local Tesco station put its price up from 99p to ÂŁ1.00/ litre, except someone messed up and changed it to 1p on their system. Lasted an hour or two and the staff honoured the price. No queues, few dozen happy locals, supermarket still trading. Sometimes unintentional PR works better.

John Riordan
John Riordan
2 years ago
Reply to  Tony Taylor

Still makes sense if you know someone without a job, eg one of your kids, and you give them the car keys and $20, telling them to keep the change.

Brendan O'Leary
Brendan O'Leary
2 years ago
Reply to  Tony Taylor

It would have occurred to anyone who knew in advance that they would be queuing all day. Then they only have to figure what their time is worth.
Did Povey’s competitors go bust?No? Then it bothered some but not others.

David Stewart
David Stewart
2 years ago

There is no new thing under the sun: “It looks like snow, said the Laplanders, who had skis to sell…” Snorri Sturluson, c.1200 AD

James Joyce
James Joyce
2 years ago

Uber. Lyft. Bolt. Surge pricing. How can this chap write an article on this topic and not mention this? If you have to go 10Km and the usual price is €10, it is painful to look at your phone and see the quoted price is now €30. Why? Because there is a storm, a football match, a huge event that creates huge demand. What to do? Well, surge pricing works. It attracts more drivers, which drives the price down. So if you wait 15 or 30 minutes, there is likely a return to something resembling normalcy. Markets work. Governments don’t.
Let’s stop offering socialist and crazy solutions–“let’s subsidize poor people buying toilet roll–” how would that even work? Instant gratification has costs. Markets correct these things in time. Raise the prices, keep the government out of it. And yes, the American example of a “gouger” being arrested is about what you would expect from economically illiterate and woke politicians.
Maybe Uber drivers should also be arrested for surge pricing?

rodney foy
rodney foy
2 years ago
Reply to  James Joyce

If, as seems likely, it’s going to be over in a few days, then the government should keep out of it. However, I feel I could be boxing myself into a corner if I said that they should never tamper with any markets under any circumstances. I would need a crystal ball

Colin Elliott
Colin Elliott
2 years ago
Reply to  rodney foy

Unfortunately, this government appears to do nothing, waits a while, says it’s “working hard with …….”, then gives in and does something ineffective, implying that it can cure the problem, thereby reinforcing the idea that all problems are solved by citizens doing nothing and leaving it to the government of the day, and yet the problem eventually goes away by itself, or rather, is replaced by the next headline..

Brendan O'Leary
Brendan O'Leary
2 years ago

Energy issues in the UK are a tangled web of government controls but when supply falters it’s always “a crisis of capitalism” to the Marxist crowd.

rodney foy
rodney foy
2 years ago

I know people here don’t like The Guardian, but I like to listen to all points of view to make my mind up. Much as I’m troubled by the Labour Party, The Guardian quoted Luke Pollard, the shadow environment secretary as follows :

“This is a playbook we’ve seen from the government for every crisis. Deny there’s a problem. Fail to plan for the problem. Blame the public for the problem. Blame someone else and then call in the army. It is utter incompetence.”

Does that statement have merit?

Hilary Easton
Hilary Easton
2 years ago
Reply to  rodney foy

That reminds me a little of the ‘four stage strategy’ recommended on Yes Minister. https://www.youtube.com/watch?v=nSXIetP5iak&ab_channel=Far-RightWatch

rodney foy
rodney foy
2 years ago
Reply to  Hilary Easton

Absolute classic

Brendan O'Leary
Brendan O'Leary
2 years ago
Reply to  rodney foy

No – it’s just empty waffle and anyone who can still remember a Labour government knows they were as bad.

rodney foy
rodney foy
2 years ago

Yep, I left it to you to add that

Norman Powers
Norman Powers
2 years ago

Another thought.
Although the justification for not raising prices is presented in terms of reputation or fairness, I suspect a big part of it in many industries (including fuel distribution!) is inadequate management and IT systems to allow surge pricing to be implemented. The problem is that nobody likes raising prices. It means making a decision, and one that will upset the left. Most employees would rather dance on hot coals than make a complicated principled argument for a decision that will upset some large fraction of their coworkers, so they default to doing nothing, and then look for a justification for that decision.
If you look at Uber, although sometimes surge pricing is criticised by the usual suspects, most leftist criticism is targeted towards pay and conditions for drivers, not increasing prices during times of high demand. The reason they can do this without a reputational hit is because it’s advertised up front as being fully automated via algorithms. No middle-manager ever has to sit in their office sweating over whether to raise prices or not, let alone do it repeatedly. The computers make the decision. If people ask why prices have gone up, you point at the abstraction of an algorithm – decided on as a group during calmer times and which isn’t easy to change on a whim – and effectively punt the “blame” onto the group.
The same is also true in the airline industry, as the article notes.
One way to do this more widely would be payment technologies that deeply incorporate the notion of Vickery second price auctions. In such an auction a fixed supply of goods is not given a fixed price, decided on by people, but rather, everyone bids on the goods. But it’s not a regular auction: the winner doesn’t pay the price they bid. They pay the price the next highest person bid. For various auction-theoretic reasons this encourages people to bid what the thing is genuinely worth to them, and ensures they only ever pay that or less. Second price auctions are best done online but can be automated and run extremely frequently. They’re how online advertising is sold, for instance. More widespread usage of the technique might seem weird to people used to fixed and stable prices, but in a world dominated by home deliveries negotiated through the internet, it would make the economy a lot more able to fairly allocate goods during times of demand surges, and in a way that is mathematically provable to be “fair” (in the economic sense).

Last edited 2 years ago by Norman Powers
John McGibbon
John McGibbon
2 years ago

An alternative might be to prosecute those that initiate the panic buying, in this case members of the road haulage industry appear to have been identified as the cause of the panic buying. For the run on Northern Rock, a certain “journalist” perhaps.

David Scott
David Scott
2 years ago

To avoid the ‘gouging’ comments and bad publicity that brings, set a minimum spend of say ÂŁ50 per vehicle. That would ensure stopping drivers who continually top up “just in case”, reduce lines of cars and stop wasting the storage of huge amounts of fuel in cars that stand idle most of the time. Retailers benefit from larger transactions per customer. People who really do need the fuel are then able to get it.

Antony Hirst
Antony Hirst
2 years ago

I agree. A completely free market on fuel prices with no taxation. Then I think we could expect massive technological research into fuels and synthetic fuels and a massive uplift in the working conditions and salaries for all those people involved in the industry…including the driver delivering the fuel.

Hilary Easton
Hilary Easton
2 years ago

Raising prices is not the solution here, though it may have been for toilet rolls. In the case of toilet rolls, there is no limit to how many an individual may buy and alternatives can be found if necessary. Neither of these are true for petrol and diesel.
Whatever the price of fuel there is no real alternative for most people in the short term, though some may be able to walk or take public transport or stay at home, but commuters and small businesses will be hit hard. Once everyone has filled their tank, things should go back to normal.

Alan Thorpe
Alan Thorpe
2 years ago

Does anybody know how Tom proposes to solve the crisis after reading this?

Jon Hawksley
Jon Hawksley
2 years ago

This will achieve nothing. Increasing prices in this instance will not increase supply immediately, which is constrained by distribution capacity. Higher prices will not stop individuals stockpiling. Stockpiling is limited by tank size. Rationing will merely mean people will go to several petrol stations to fill up. The immediate problem is that people are topping up their tanks resulting in a surge in demand. A better suggestion is to have a high minimum charge, say ÂŁ60, to deter the topping up of half full tanks. Longer term the industry bodies need to monitor the resources in their market better and the government needs a better framework for listening to the problems that they anticipate. There is a pattern of incompetence that suggests there is worse to come.

Norman Powers
Norman Powers
2 years ago
Reply to  Jon Hawksley

How is a high minimum charge not higher prices?

rodney foy
rodney foy
2 years ago
Reply to  Norman Powers

Presumably, Jon meant if you don’t put at least ÂŁ60’s worth in your tank you should be charged ÂŁ60 anyway. Interesting idea I thought

Niobe Hunter
Niobe Hunter
2 years ago
Reply to  Jon Hawksley

What about motor bikes?

Rasmus Fogh
Rasmus Fogh
2 years ago

Funny how you can always find lots of people to tell you how it is good and moral and praiseworthy to grab as much money as you can at other people’s expense. Could it be that those are the people most willing to pay for hearing what they want to hear?

Anyway, WC Fields put it much better: “It is morally wrong to give a sucker an even break.”

Colin Elliott
Colin Elliott
2 years ago
Reply to  Rasmus Fogh

The thesis is that if sellers simply increased the price, it would alter the decision making such that only those with a pressing need would continue buying, whereas those topping up unnecessarily would refrain. Of course there’d be undesirable outcomes, and conscientious might be put to extra expense, while someone wealthy was unaffected. The seller might make unexpected profit (not necessarily if volume of sales decreased), but this is where the incentive to, for example, pay and work overtime comes in.
Let’s consider a possible solution; the price is increased by a set amount by government decree, the receipt is given an OCR receipt, or perhaps digitally via Bluetooth into a smartphone, and the payer claims online by fulfilling a condition, maybe another code issued be by employer or contractor (i.e. local authority, school or hospital).

Andrew Horsman
Andrew Horsman
2 years ago

Is Tom Chivers living in an undergraduate microeconomics textbook theoretical fantasy la-la land, devoid of real world politics context? Or was he just struggling to think about something to write about before his deadline? Does it not occur to him that it just might be possible that the coalition of moral weaklings and evil cultists who offend our sensibilities by having the gall to describe themselves as our government might be engineering this supposed crisis and panic to justify taking further “emergency” powers, and to obfuscate the multiple, egregious, deadly lies they have told and sold to a credulous public – and, it seems, commentariat – over the last 18 months?

I swear, it’ll be the aliens next. They are getting that desperate. They know that we know that it is all crumbling in front of their very eyes. Scared? They certainly should be.

Wakey wakey, Tom. Unherd can and should do better than this.

rodney foy
rodney foy
2 years ago
Reply to  Andrew Horsman

Are they really competent enough to engineer this crisis?

Brendan O'Leary
Brendan O'Leary
2 years ago
Reply to  rodney foy

No.

Douglas Proudfoot
Douglas Proudfoot
2 years ago
Reply to  rodney foy

Do they really have to be competent to engineer a crisis. Look how many crises Biden has made in the last 8 months with incompetence! After every one, Democrats say the government needs more power to protect us from future crises.
It only takes desire for government to make a crisis, because no actual engineering is required. Only a basic knowledge of economics is required.

Andrew Horsman
Andrew Horsman
2 years ago
Reply to  rodney foy

Good point but it’s quite easy. Just quietly seed some traditional and social media stories about fuel shortages (off the back of last week’s wider energy crisis narrative), then tell people publicly there is plenty of fuel and no-one should panic-buy, and voilĂ  – queues at every BP, Shell, and Texaco garage across the land.

Simple to commission, easily executed in a weekend by a handful of comms people, and someone else does the washing up.

rodney foy
rodney foy
2 years ago
Reply to  Andrew Horsman

Hey, let’s spread a conspiracy theory

Andrew Horsman
Andrew Horsman
2 years ago
Reply to  rodney foy

Hey, let’s not use our critical faculties to question what might be going beneath the narrative presented by our governments and blindly obey authority because, you know, that’s worked out really well for everyone in the last 18 months and it definitely doesn’t have any dark historical precedents, no siree 


Colin Elliott
Colin Elliott
2 years ago
Reply to  Andrew Horsman

I thought that was what happened? There was a zoom meeting, the BP rep made a statement including that stocks at their fuel stations were two thirds normal levels, and that 20 to 30 were out (they were all in one area).
Within an hour of the meeting, ITV news reported that fuel stations were running out. It’s utterly logical that the many people who require to travel or commute immediately take precautions (like insurance), even if they’re more than half full.
Of course, the aggregate capacity of vehicle fuel tanks is many times that of the fuel stations, and deliveries are generally in balance with sales, but can’t cope with a five-fold increase.
Yesterday, I heard that some tankers couldn’t reach fuel stations because of the vehicles backed up! The same guy said that tanker drivers were especially well paid (they require an additional certificate), and very few were non-British. Other employers were paying large amounts, which might have attracted tanker drivers away, causing problems recruiting, but it was minor and didn’t affect deliveries.

Last edited 2 years ago by Colin Elliott
Sharon Overy
Sharon Overy
2 years ago

Well, it turns out that what was needed was for somebody to shout at the DVLC, getting them to stop picking their noses at DIE meetings and process the backlog of HGV licence forms they’ve been ignoring.

Douglas Proudfoot
Douglas Proudfoot
2 years ago

The gasoline “crisis” in the US in 1973 was the result of federal government price controls on gasoline. Long lines at gas stations were the norm. I was very low on gas on a trip from Phoenix to L.A. The gas station I usually filled up at was out. I turned the engine off and coasted in neutral on the down hill sections of the dual carriage way to make it to L.A. on the gas I had left. Luckily, we learned our lesson from that fiasco. Nobody has suggested price controls lately as a solution for inflation.
In the US, Climate Alarmists want the price of gasoline to rise so they can save the planet. Climate alarmists in the US are usually rich enough to afford electric cars, and dumb enough not to notice that over 80% of US electricity is generated with non-renewable sources.

Alan Hawkes
Alan Hawkes
2 years ago

I’m trying to work out how, with any chance of timeliness, the poor and needy are to be identified and the vouchers are to be printed and distributed to these poor and needy, before the panic is over.
Besides which, we are not just homo economicus, we are also homo communitatis, which is why price-gouging on essentials in an emergency is frowned upon.

Last edited 2 years ago by Alan Hawkes
Alan Hawkes
Alan Hawkes
2 years ago

Looking at the asterisks inserted below I’m wondering which homo sapien thought that one up.

Last edited 2 years ago by Alan Hawkes
David McDowell
David McDowell
2 years ago

Hardly, the rational answer is rationing.

John Riordan
John Riordan
2 years ago
Reply to  David McDowell

Rationing is not economics, it’s politics.

rodney foy
rodney foy
2 years ago
Reply to  John Riordan

How so? Possibly if the government mandates it

John Riordan
John Riordan
2 years ago
Reply to  rodney foy

Unless you’re the one who owns the fuel to sell, then if you suggest ratioining, you are inevitably offering a view as to what someone else should be forced to do, not what you yourself are about to choose to do.

rodney foy
rodney foy
2 years ago
Reply to  John Riordan

I think petrol stations could ration their own supplies for a few days

John Riordan
John Riordan
2 years ago
Reply to  rodney foy

What use would that be? It would have the same effect as presently were daft people are sitting in queues for an hour just to put 3 more litres in the tank. The opposite should be done: minimum spend of ÂŁ40 even if you need less than that, then people would be less inclined to queue just to keep the tank topped up, which is what’s happening.

Ferrusian Gambit
Ferrusian Gambit
2 years ago
Reply to  John Riordan

And more importantly it simply doesn’t work. Market forces will extend their tentacles through the black market.