In the immediate aftermath of Hurricane Sandy, the availability of gas in New York and New Jersey went down while the demand for it went up. Within days, Governor Chris Christie responded by rationing gas in New Jersey. And Governor Mike Bloomberg’s rationing plan goes into effect today in New York.
Meanwhile, consumers, desperate for gas, and terrified of not getting it, are waiting, in some cases, for over ten hours at the pump. And profiteers who stocked up pre-Sandy are selling gas for up to $20 per gallon on Craigslist.
In the face of this gas shortage, are East Coasters turning into lunatics? Or are they acting as anyone would when measuring supply versus demand?
Christopher Knittel says that in cases like these, fear can drive fear. But the solution might be simpler than you think. Knittel is professor of energy economics at MIT’s Sloan School of Management.