On the first day of my summer vacation...

So the Dept of Energy finally responded to my email. If you read my original letter and the response you can see the deep irony in the form letter that they sent. Here it is:
Dear Sir/Madame:

Thank you for contacting me regarding gasoline prices in the wake of Hurricane Katrina. I want to assure you that this Administration – from the President down – shares your concern, and we have taken aggressive steps to ensure American consumers have the fuel they need.

As you know, Hurricane Katrina resulted in the suspension of most domestic oil production and refining in the central Gulf region. Coupled with increasing demand for oil overseas, over the past months American consumers have experienced a price spike as a result of tighter supplies.

In order to quickly address this situation:

I authorized loans of oil to refiners from our Nation’s Strategic Petroleum Reserve to ensure that gasoline refiners have the supplies necessary to continue production and keep gas stations stocked;

President Bush took the historic step of directing me to sell oil from the Strategic Petroleum Reserve, in coordination with sales by the other 25 member countries of the International Energy Agency;

The Department of Energy worked in close coordination with the Department of Homeland Security, the Environmental Protection Agency, and the Department of Transportation to waive regulations that would impede the efficient flow of gasoline and other products to first responders and markets experiencing shortages.

The Department of Energy is also taking action to protect consumers from price gouging. While our hope is that all Americans would come together in this time of national tragedy, we recognize that some may seek to take advantage of this situation. If you, or someone you know, believe you have experienced price gouging, I encourage you to register a complaint by telephone (1-800-244-3301) or online at www.energy.gov.

All complaints will be forwarded to the Department of Justice, Federal Trade Commission, and the State Attorneys General for investigation, and, where appropriate, prosecution.

I try to express ideas about the free market in as simple terms as possible (that's also the only way to get published in the Orlando Sentinel). Here is the best way that I have come up with to summarize the dangers of price controls during the hurricane season:
"Protecting people from "greed" by outlawing price increases is like protecting people from obesity by outlawing gravity."

Do you think Readers' Digest would print that one?

On my early morning Sunday training ride through Suburbia, USA I noticed an all too familiar sight; nearly every gas station I passed was hosting a charity car wash. No doubt that the greater than ordinary occurances of these events was due to hurricane Katrina. Of the 4 car washes that I remember seeing 3 of them were "charging" $5 per car and the forth was just asking for donations. This variation in pricing strategy leads to the question: IS ONE PRICING STRATEGY MORE EFFECTIVE THAN ANOTHER FOR CHARITY CAR WASHES? I am assuming that each group is trying to maximize the amount of money raised. I am also assuming (for the sake of this question) that the 2 strategies that can be chosen are either a set price strategy or an open price strategy. So what do you think, do you set a price or do you let the customer decide?

My theory (based on price theory and auction theory) is that it doesn't matter; you will earn the same amount regardless of your pricing strategy. It makes sense in my head (quite the scary place) I am just trying to figure out how to explain the concept.

Dear Department of Energy,

I would like to report a possible episode of price gouging. I would use the Gas Price Watch Reporting Form (http://gaswatch.energy.gov) that you have conveniently provided a link for on your homepage, but my situation is a bit too complex to fit in the “300 character limit” box. Besides, this complaint is not about gas prices. I believe that you, as a government organization, may be the victim of price gouging. As a taxpayer, I am asking for your full cooperation in this sensitive matter. I want to ensure that you have not been victimized into spending an unfair amount of the money that I provided you in April of this year. I believe that your very own employees might be engaged in the despicable act of price gouging. There is a strong possibility that many of your employees are unfairly profiting from the money that you are forced to pay to them. You can, of course, determine if this atrocity is occurring by simply comparing the amount that they are charging you for their labor to the amount of their expenses. If there is an “unfair” disparity between the two then the price that you pay for the employee’s labor should be immediately lowered. After all, these are tough times and we want to be fair to everybody. There is no room for unfair profiteering. Since justification of prices is such a subjective matter, I will be more than happy to help in any way that I can. I will ensure that no one is using any of their unfairly accrued profits to save for the future, or to invest in own human capital, or to invest in their families. If we work together I am positive that we can relinquish this matter in a timely fashion.

Thank you for your concern.
Adam Gifford
Economics Instructor
Lake-Sumter Community College

PRICES PREVENT SHORTAGES. Gas prices have been increasing at a faster rate than most people have ever seen. We are about to hit a new national record. The highest price of gas that the nation has ever seen (adjusted for inflation) is an average of $2.91 per gallon in 1979. I paid $2.89 this morning. Even though the high prices are a common topic of complaint from water coolers to radio DJ's (who are making this country dumber by the minute) these prices are preventing something much worse. High prices are preventing gas shortages. A shortage is a very specific occurance where supply is unable to meet demand. This is regulated by prices. High prices lower demand and create incentives to increase supply. Unfortunately many people (including the mind numbing morning DJs) are under the impression that we are experiencing a gas shortage. What we are experiencing is a decreased supply; NOT a shortage. We WILL experience a shortage if prices are not allowed to continue to rise. We saw this in 1979 when Carter put a price ceiling on gas prices. We also saw this last year when economically ignorant Florida laws put a price ceiling on gas prices during and after our four hurricanes. So be grateful that prices are increasing; your alternative is an empty gas tank.