How McCrory and Cooper differ on the gasoline problem

North Carolina’s gubernatorial candidates reacted to the Colonial Pipeline shutdown that is temporarily affecting gasoline supplies in North Carolina in ways that reflect their differing approach to governing.

Attorney General Cooper tightened regulation, thereby unintentionally opening the door to quicker shortages. Cooper, warning of “price gouging,” has the state’s anti-gouging law in effect in order to keep people able to purchase gasoline at pre-temporary-shortage price levels.

shortageBut demand curves still slope downwards, and prices are signals of relative scarcity. A higher, temporary price of gasoline incentivizes consumers to ration their purchase of gasoline voluntarily, and it also dissuades them from hoarding, which only leads to shortages more quickly.

The WLOS story linked above mentions gouging after Hurricane Ike in 2008, which Cooper’s office went after. It doesn’t discuss that Ike was the first major test case of the anti-gouging law, and it certainly doesn’t mention the aftermath of applying the anti-gouging law after Ike: widespread gasoline shortages, which didn’t happen following Hurricanes Katrina and Rita in 2005, which predated the anti-gouging law.

Forcing prices to tell people to consume as usual as if there isn’t a temporary greater scarcity causes supplies to run out, plus there’s no incentive for suppliers to redirect supplies here because they can’t make any money doing so.

Gov. McCrory lightened regulation, thereby opening the door to more supply.

Supply curves slope upwards. The expectation of higher retail prices here will incentivize suppliers to sell here, as long as the transaction costs (i.e., getting the supplies here) aren’t too high.

Friday night, McCrory signed Executive Order 101, which waives “certain size and weight restrictions and penalties … and certain regulations and penalties … for the vehicles transporting gasoline and other petroleum products to areas within North Carolina.”

If prices were allowed to reflect the market situation accurately, the temporary higher prices here would induce other suppliers to redirect resources here. The anti-gouging law stifles that.

In lieu of market pricing, reducing the regulatory costs to bring supplies to North Carolina also gives suppliers more profit opportunity here, which will help bring in more gasoline from otherwise.

In an Esse Quam Videri state, anti-gouging is “Seeming” the solution to the problem, while lower regulation is more “Being” the solution.

Jon Sanders / Director of Regulatory Studies

Jon Sanders studies regulatory policy, a veritable kudzu of invasive government and unintended consequences. As director of regulatory studies at the John Locke Foundation, Jo...

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