Since Hurricane Katrina took out a wide swath of oil platforms and refineries on the Gulf Coast (see this cool NY Times graphic),
there have been widespread accounts of price gouging at the gas pump. Some folks have reported gas prices as high as $5 a gallon in the immediate vicinity of New Orleans. Others have reported that gas shortages are making it hard to find places to fill up. I guess I get confused when people talk of price gouging, though, because there's some basic economics behind the higher prices.
I realize that it is considered morally reprehensible to raise prices in response to natural disaster, but gasoline is a little different from water, food, or shelter. First of all, it's not a survival necessity. Second, the supply is very limited. Gas stations need their tanks refilled regularly and a disaster that wipes out infrastructure suddenly makes gas very scarce. Econ 101 teaches us that scarce items should become more expensive, since people become more willing to pay higher prices for scarce items. But isn't that price gouging?
I say no. There are plenty of examples of people acting panicky and irrational after disasters like this, and artificially low prices just encourages it. If gasoline has to stay cheap, people will fill their car plus 3 or 4 extra gas canisters (just to be safe). There's no quicker way to guarantee the gas will run out. If, on the other hand, a gas station can charge whatever it wants, some people will decide not to buy gas, a few people that really need it won't be able to afford it. But at least we won't suffer widespread scarcity.
I'm no fan of paying $3 a gallon for my gasoline, but I don't really have a problem paying fair market value.
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