New Missouri bill would soften gasoline price increases

December 1, 2011 was the kickoff for pre-filing bills in the Missouri legislature for the 2012 regular session. I was browsing the list of House bills filed (click here to see it), and one bill really left me scratching my head: It’s HOUSE BILL NO. 1044, sponsored by Representative Ray Weter of Nixa, Missouri.

The new law requires that gas stations “shall notify the general public” 24 hours in advance of any price increase of 3 or more cents per gallon. The notification must be visible from the adjacent roadway and the notifying signs must be provided free of charge to each gas station by its wholesale supplier.

Sometimes the purpose of a new law is obvious, but unless Representative Weter explains this bill, we can only guess. Signmakers–at least–will appreciate this little stimulus (although the reason the wholesaler has to pay for the signs is a mystery).

Perhaps Representative Weter was thinking how nice it would be if he knew that gas prices were going up tomorrow. He could fill his tank today and save money. I can appreciate the sentiment.

We are all annoyed to pull into a gas station and find that prices have just been raised. This new law would end that annoyance for all of us, but why stop with price increases? After all, it may be even more annoying to fill up today, only to find the price dropping tomorrow. I’m really just guessing who this bill is supposed to benefit.

Thinking ahead–to a time when this bill has become law–one can imagine Rep. Weter leaving Jefferson City after a hard week of lawmaking, when he notices he needs to fill the tank to get home to Nixa, Missouri. Oddly enough, the first gas station he passes has a long line of cars. He also notices a sign is flashing the message that gas will go up a dime tomorrow. (These signs, by then, have affectionately become known as “Weter” signs).

He drives on to find a line at every gas station, finally stopping at the last quick store at the edge of  town. He gets in the line and a half hour later reaches the pump as the manager walks out and apologizes that the station is fresh out of gas.

This well-intentioned legislation may turn out to be far more annoying than a rise in gas prices. Who can doubt it would periodically disrupt the sale of gasoline? Sure, it would be nice to know when gas is going up, but the same is equally true of tomorrow’s stock market index or the score of Monday night’s football game. It just doesn’t work if everbody else also knows.

Perhaps the public would be better served if this bill were amended to simply require all the gas stations to notify Rep. Weter of any price increases and leave the rest of us out of it.

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UPDATE: Rep Weter has now explained the bill and how long lines at gas stations could be valuable. From LandLineMag.com:

Weter said he was spurred to act after witnessing significant price increases in his district.

“People are short on cash in this day and age. And if I can save some money buying fuel one day to the next, I would like to know about it ahead of time,” Weter told Land Line.

Critics say the price postings would result in long lines at the fuel pump. That notion does not deter Weter.

“Long lines aren’t necessarily a bad thing. If that is the case, I think it sends a message. I think it would send a message that people like the idea of having advance notice,” he said.

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Price gouging is a service, not a crime

I went to the hardware store after the snowstorm hoping to score some ice melt, only to discover that it’s all sold out.  I only needed one bag and I’d have gladly paid more to get what I needed.

The thing that really frosts me is that the reason I could not get ice melt was because politicians know they can win votes by creating the crime of price gouging.

The anti-Price Gouging law

I can’t explain it any better than does our Missouri attorney general at his website:

It’s against Missouri law to take advantage of a desperate situation by drastically increasing prices on merchandise, whether it’s gasoline, kerosene after winter storm, hotel rooms, ice, gas-powered generators and other necessities.”

He is referring to Missouri’s Unlawful practices statute, which reads:

407.020. 1. The act, use or employment by any person of any  . . . deception, fraud, false pretense, false promise, misrepresentation, unfair practice or the concealment, suppression, or omission of any material fact in connection with the sale or advertisement of any merchandise . . . . is declared to be an unlawful practice.

Violation of this statute is a class D felony.

One may rightly wonder how this law prohibits “price gouging.” It’s because the legislature gave the Missouri attorney general permission to make regulations needed to enforce the law (apparently intending that the attorney general would designate sizes and styles of typefaces acceptable for use in consumer advertising).

Years went by before the attorney general created regulations which would transform this anti-fraud law into what should be called the “Lets-run-out-of-everything-as-fast-as-we-can-when-we-need-it-most” law. The regulation became law and created the crime of price gouging:

15 CSR 60-8.030 Price Gouging

PURPOSE:  . . . this rule enumerates specific practices which are unfair and are violative of section 407.020, RSMo.
(1) It is an unfair practice for any person in connection with the advertisement or sale of merchandise to—
(A) Take advantage of a person’s physical or mental impairment or hardship caused by extreme temporary conditions, and charge a price substantially above the previous market price of the merchandise in seller’s trade area;
(B) Charge within a disaster area an excessive price for any necessity; or
(C) Charge any person an excessive price for any necessity which the seller has reason to know is likely to be provided to consumers within a disaster area.

The law seems to have no purpose except: 1) to soothe the feelings of angry citizens who feel they have been taken advantage of; and 2) to provide the Missouri Attorney General a platform from which he can pose as champion of the consumer.

Harmful effects:

When it comes to helping the rest of us, the law does nothing to insure that we can buy essential goods when we need them most. On the contrary, such price controls guarantee that we will NOT have enough of what we need.

If a disaster strikes, and water, gasoline and food cannot be sold for significantly higher prices, then stores will sell out early as everyone buys more than they need. Then none is left to buy AT ANY PRICE. In addition, it is unlikely anyone will rush to bring in essential supplies when the government has removed the profit incentive.

In an emergency, a hotel manager who doubles his room price on 100 rooms, may force a big family to rent one room instead of two. Or cause two poor families to double up. If such “price gouging” were allowed, the hotel could provide shelter for twice as many people in an emergency. True enough, the hotel owner gets a big payoff, but should that be a crime when it was only his self-interest that put everybody under a roof?

The repeal of price gouging laws would in itself decrease the severity of shortages when they do occur. If merchants knew they could raise prices during shortages, more would take risks and stock up on ice melt and snow shovels. But with no prospect of a payoff, they play it safe and stock just what they are sure they can sell in a typical winter. And if people knew prices could rise greatly during emergencies they might be better prepared, further decreasing the demand in times of shortage.

Some say that the merchant’s sin is greed, but at least the merchant’s self-interest serves the public by keeping goods available. The flip side of the merchant’s greed is the consumer’s envy, which does no one any good, neither housing nor feeding anyone. Is it harsh to say that anti-price gouging laws are motivated by hate? That supporters are people who would rather have NO GAS available at $3.00 a gallon, than have all the gas they want at $5.00? Under this law, half of us can get our gas tanks filled, whether we need it or not, and the other half goes without. This has to be one of the more foolish laws we have, yet most people probably think it’s good.

Missouri’s Attorney General has been aggressive in threatening Missouri merchants with prosecution if they violate these price controls. See Attorney General Koster warns consumers about storm-related price gouging. Koster makes it easy for “victims” to complain at his website:

Click here to rat out greedy businessmen.


For more information about the “wisdom” of price gouging laws:

The Role of Prices- Walter Williams

Price Gouging Saves Lives

The Non-Crime of Price Gouging

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