Panic leads to high gas prices
It always amazes me when there is a prediction for bad weather and people panic.
The result seems to be a rush for certain products, which leads to shortages and higher prices.
The biggest example is the threat of snow here in Alabama. If one of the meteorologists on the news even hints that there might be snow, people run to the stores and buy all the milk and bread.
Yes, from time to time there are some bad snowstorms that hit the area. These storms can cause a loss of power for several days, but storms of this magnitude only roll around every few years.
While bread and milk are commodities during a snowstorm, other commodities are ravaged in perfectly good weather.
Last Friday, people heard that Hurricane Ike forced the closing of oil refineries in Houston. Many people in Alabama raced to the pumps and filled their cars because they feared there would not be any gas by the end of the week.
This caused gas prices to soar – the price for regular unleaded at the gas station near my house increased 50 cents. That was a minor increase compared to some areas in the state.
One gas station in Greenhill was charging $5.35 for a gallon of regular unleaded.
The price was pushed up because demand rose so steeply. For example, say gas station X keeps 3,000 gallons of regular unleaded in its tanks and the average car holds 13 gallons of fuel.
That would mean station X has enough gas to top off 230.8 cars if they are completely empty.
Now assume the station averages 60 cars per day, the station would keep four days worth of fuel on hand.
During a rush, however, the station may have 180 cars show up to purchase gas. This has cut into the station's supply. It now has to find gas to replace what was sold.
Suppliers are strained because they only have so much gas on hand at one time. Soon, the supply is depleted and the cost has risen.
Instead of waiting to see what kind of damage was created by the storm, people assumed the worse and drove the price of gas up after it was finally beginning to decline from record highs.
If people had waited until Saturday to see what damage was done to the refineries – not much – the prices would not have risen so sharply in such a short time.
I know people need gas to get to work and nobody wants to pay $4 for a gallon of gas, but panicking only drives up the cost.