The Folly of Odd-Even Gasoline Rationing

A blog about business and economics.
Nov. 9 2012 12:00 PM

The Folly of Odd-Even Gasoline Rationing

Now that price gouging laws have led to endemic gasoline lines in New York, the state government has been forced to institute rationing. But for some reason they've hit upon the idea of rationing according to your license plate number. Some days only people with odd numbered plates can buy gas while on other days only even numbered plates can go.

The question is: What problem is this supposed to solve? All it seems to do is exacerbate the problem of hoarding. Under the rationing regime you know that on Wednesday there is absolutely no way you'll be able to buy gasoline. Therefore on Tuesday you need to buy all the gasoline you can possibly get as a hedge against the possibility that you'll need it tomorrow.

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So to reiterate. Given the objective lack of supply in the region, New York needs to do two things. One is it needs to encourage people to conserve fuel. You do that with high prices. Artificially low prices plus scarcity do the reverse and encourage hoarding and overconsumption. The second is that it needs to increase supply. The United States of America is not out of gasoline. Nor has New York City drifted off into some unreachable ocean. It's simply that some of the transportation facilities that are vital to the economically efficient distribution of gasoline have been damaged. What needs to happen under the circumstances is that some economically inefficient means of gas distribution should be considered. A fleet of small boats could take off from Southern Connecticut carrying gasoline, cross the Long Island Sound, and unload on the north shore of Long Island. It would only be worth people's time to bother doing this if they could sell the gasoline for a lot of money, but there are a lot of people on Long Island who'd happily pay a lot of money to get some gasoline!

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.