Tuesday, November 13, 2012

Hurricane Sandy: Gas Rationing NYC

Disasters often cause us to reconsider the old way of doing things, for example last year Hurricane Irene was a major disaster in my area.  Mayor Bloomberg's gas rationing program in response to the damage and ensuing shortage of gasoline following Hurricane Sandy was issued for the city of New York to limit gas consumption.  This terrible storm badly damaged the city, particularly the subway, which many New Yorkers rely on for daily transportation.  In response, denizens of the city loaded up on gas to power generators and alternative transportation vehicles.

The ban restricts the ability to purchase gas based on the last digit of the owner's license plate.  If it ends in an odd number, that individual can buy gas on odd days, and vice versa for even days/last digits.  The only other gas rationing I have experienced was in crowded Beijing, China.  They take it even further, wherein drivers can only drive on odd/even days.

Although no one likes their liberties being restricted, there is definitely the potential for good to be accomplished through a rationing strategy.  My idea is to promote gas rationing, but make the incentives positives rather than negative.  Offering benefits for those of us who choose to only purchase a small amount of gasoline per week/month, or offering cheaper public transportation.  In addition, I think gas prices should be increased, and the additional tax used to offset damage caused by pollution.

These suggestions take time to implement, but this is the exact type of external benefit or cost that supply and demand economics fails to accurately capture.  The maximum marginal value to society is not reached at the supply and demand equilibrium price and quantity.  By limiting gas consumption through raised prices or artificially lower quantities, it will encourage more efficient use of the precious fuel.  This non-recoverable, polluting resource consumption must be curtailed, and it won't happen organically.

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