Shortly after our story about the short-lived gas shortage panic here and the prospect of gas prices increasing for the foreseeable future, I received an Ask Us question.
Yes, for those of you who doubt readers actually submit them, they really do. And this reader wanted to know why that even with a refinery in Big Spring that was not damaged by Hurricane Harvey, gas prices in Snyder had jumped more than 30 cents in two days.
Yes, there are some bad actors who took advantage of the situation, including some station owners, although thankfully none here. The bad ones raised their prices artificially to inflate their profit margins. That’s unfortunate, but if a driver felt one station’s prices were too high, they were free to shop for gasoline at a different station. Even here in Snyder, the gap in prices was pretty wide during the worst of the rush.
Some of the price increases are being driven by consumers themselves. As social media rumors of gas shortages spread like wildfire, drivers made a rush on gas stations. Railroad Commission of Texas Commissioner Ryan Sitton said of the issue, “unfortunately, hoarding and panic buying have placed unnecessary strains on gasoline supplies at pumps in certain pockets of Texas.”
He also singled out one group he said was up to no good.
“To those buying large volumes of gasoline to turn around and sell at a premium, that is ‘black market’ gasoline sales, and it is a violation of the law. It contributes to the gasoline panic, and I expect it will be fully prosecuted by authorities.”
But as we learned in Economics 101, this really all comes down to being a matter of supply and demand. As demand increases, causing supplies to shrink, prices climb.
It’s actually a little more complicated than that, with the infrastructure of connected wells, pipelines, refineries and distribution points that criss-cross the nation. At each of those points of contact, decisions are made about pricing based on the commodity’s costs to reach that point and the anticipated demand. Throw in spot pricing, futures contracts and a host of other factors, and it gets pretty complicated.
But at the end of the day, the gas stations operate in a free market and should be allowed to charge what the market will bear. Same goes for each of the middle men in the supply chain, from the well operator to the delivery trucking company.
On the flip side, because there’s competition among the stations, there is pressure to remain competitive. That can serve to hold prices down, up to a point.
But even if there are competitors in every direction, as the stations’ gasoline costs increase, they really have no choice but to raise their prices to the consumer. Well, that or go out of business.
As a consumer, the situation can be frustrating — watching prices climb and knowing that each time you drive past a station your gas tank is getting a little closer to empty and another, more expensive, fill-up. As a business that pays delivery people to drive hundreds of miles around Scurry County six days a week, I definitely understand. And ours’ is a short trip compared to the mileage racked up by a bunch of companies located here.
But that’s the economy our nation is built upon and I’m not sure there’s a better concept out there. Some bad actors will take advantage when they see an opportunity, but by and large businesses are just trying to provide a good or service in a way that generates a profit.
And there is certainly nothing wrong with a business — any business — pricing its product in a way that generates a profit for its owners and any shareholders.
I may be a left-leaning fool who’s dead wrong on this, but I kind of like a free market where consumer demand, rather than government controls, drives the rise and fall of prices.
Bill Crist is the publisher of the Snyder Daily News. Comments about his column may be emailed to publisher@snyderdailynews.com.