The stylized facts. First, lots of petrol stations are closed for lack of power. Second, there is a temporary gap in supply such that if folks only filled up normally, all would be fine. But, if everyone is filling up all the time, the stations cannot handle the spike in demand combined with the temporary supply shock. And given that everybody else is behaving badly, it is optimal for each player in the game also to behave badly. If everyone expects that everyone else is panic buying, then everyone will rightly expect queueing and empty stations when they go to fill up. Moral suasion has been tried and has failed to break the bad equilibrium.
The very best way of solving this problem is a temporary price hike. Figure out when normal supplies will be restored. Announce that prices double until that day, at which point they drop by a quarter per day till back to normal.
The usual case for price gouging is it helps draw resources to the area. There is no margin for that here. They're already doing all they can. Instead, the point is purely allocation. Both to current users and over time. We want to make sure that the guy with a half a tank decides to wait instead of filling up. If he knows prices will be cheaper in two days, he will hold off.
And, even better, folks will also decide to cut back on discretionary driving when construction and emergency vehicles need the roads.
Some folks worry about these poor not affording gas. The gains of reduced queueing and reduced congestion massively outweigh equity considerations of this sort. Or, think of it this way. In a crazy emergency like this, are more people screwed by having to queue for hours for gas, or are more screwed by having to pay an extra twenty bucks for enough fuel to see them through the day?
Double petrol prices. Do it now.
So folks don't hate the petrol stations, call it a two dollar per litre earthquake surcharge with proceeds going to earthquake relief. Normally extra profits help bring more resources to the region. I can't believe there's any margin there this time round. Avoiding backlash then more important.
Note: apologies for hasty and likely typo-ridden post. Internet dodgy. Thanks to Bernard Hickey for posting the initial deck.ly version of this up on Interest.co.nz before I hacked a way into Offsetting.
Update: Response to Keith Ng.
