According to The Knoxville News-Sentinel there are gasoline shortages in Tennessee (something that may soon be afflicting the entire southeast):

Knoxville-area drivers are seeing more bags on gasoline pumps today as a petroleum shortage spreading throughout the Southeast hits local gas stations, groceries and convenience stores.

Refinery outages along the Gulf Coast in the wake of Hurricane Gustav have created severe shortages, causing retailers like Weigel’s to scramble to keep their pumps flowing. And Hurricane Ike is bearing down on Texas, drawing a bead on North America’s petroleum manufacturing capital of Houston and portending a worst-case scenario for dealers and consumers.

So is it the aftermath of Hurricane Gustav that’s causing these shortages?  Or stupid policy against “price gouging” put in place by the Tennessee state government?  According to a CNN article from earlier this month Tennessee has been in the lead among southeastern states in combating “price gouging.”

Tennessee was the first state to file suit against gas stations, announcing two suits in the last week. Tip Top Mart of Chattanooga was charging $5 a gallon following Katrina, allegedly violating the Tennessee Price-Gouging Act.

A McMinnville, Tennessee station was the subject of the second suit after it charged $7.00 a gallon for gasoline. The posted price was $3.50, but gasoline pumps had notes on them saying “Doubled,” which most consumers missed until after they had filled their tanks.

Violations of Tennessee’s gouging act are misdemeanors with a potential fine of $1,000 per violation.

So here’s the thing: Hurricanes, we know, put strain on supplies of gasoline by either making demand spike of slowing supply Or both.  But when gas stations (or even grocery stores as I pointed out in a previous post on this subject) aren’t allowed to raise their prices accordingly to match fluctuations in supply and demand we see shortages.

Think about it.  When a natural disaster strikes, or is even just impending, what do people do?  They seek to stock up on gasoline.  But with demand up, and supplies likely short, what stops them from buying more than they need?  Higher prices.  It’s how free markets ration.

Because it’s better to have some gasoline available at a high price than no gasoline available at any price.