Post 9/11 gasoline price gouging in Wisconsin: two views

Michael Giberson

The terrorist attacks of September 11, 2001, created a great deal of uncertainty and fear among Americans. In the retail gasoline market, some (but not all) consumers reacted to the uncertainty and fear by heading to a gas station to fill up their tanks. Some (but not all) gasoline retailers reacted to the uncertainty and fear by raising their gasoline prices, in some cases raising prices dramatically. A newspaper story published September 12, 2001, in the Madison, Wisconsin The Capital Times captured a sense of the concerns and reactions at the time.

One common response to 9/11 gasoline price increases was to try to shame retailers for their actions:

Citing reports of gas prices as high as $8 per gallon in Wausau and $4 per gallon in Waunakee, Gov. Scott McCallum said this morning that price gouging will not be allowed in Wisconsin….

“We are not going to stand for it. It is un-American for people to take advantage of other people for what happened yesterday, of such a tragedy,” McCallum said.

The story also includes a quote from a “Desert Storm veteran,” who called the price increases “war profiteering.” Another consumer said of gasoline retailers, “this is like them having blood on their hands and profiting from one of the worst situations we’ve ever seen.” These are the attitudes that politicians cater to when they call for state action to control price gouging.

Contrast efforts to shame retailers to these remarks by a University of Wisconsin economist, directed more at consumers:

But Mark Ready, an associate professor of finance at the University of Wisconsin-Madison and former chief economist at the Securities and Exchange Commission, said people who lined up for gas Tuesday night bought more than fuel.

“The people who paid a lot last night were buying more than gas. They were buying protection against uncertainty and they were buying the ability to hoard,” Ready said. “To me, I don’t necessarily see it as a problem that they were charged a lot. There were some people who rushed out and gave blood and others who rushed out and bought gas.”

Note the two parts: (1) consumers were buying a bit of physical insurance by getting fuel into their tank, which was particularly valuable to consumers fearful of subsequent market disruptions, but also (2) the implied but relatively mild criticism of consumer selfishness in the remark, “some … gave blood and others … bought gas.”

The moralizing impulse to cast price increases during emergencies as immoral attacks by the retailer against the community seems to be pretty strong, at least among many people. Since the laws implemented to cater to these moralizing impulses almost certainly make consumers worse off, the impulses have dysfunctional outcomes.

 

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4 thoughts on “Post 9/11 gasoline price gouging in Wisconsin: two views

  1. I saw one of those gouging stations in Fond du Lac. It was a Clark station that boosted gas to $5 per gallon. This station went out of business a short time later.

    “Moralizing impulse” is a poor way to describe those with a sense of right and wrong.

  2. “Since the laws implemented to cater to these moralizing impulses almost certainly make consumers worse off, the impulses have dysfunctional outcomes.”

    Yes, but they were well-intended. 🙂

  3. I don’t mean “moralizing impulse” to be pejorative, but rather just as a description of a situation in which (many) people apply a moral frame of reference to this particular situation.

    I think most of the time when merchants change their prices people don’t judge the changes (or the merchants) as good or evil, but rather such everyday activity is usually not a matter for moral consideration. However, in situations like described above, people are “moralizing” their evaluation of merchant price changes.

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