Natural Disasters and Price Gouging: Evidence from Gasoline Sales before and after US Hurricanes
- / Norman Lenburg/FEMA Photo by Norman Lenburg - Oct 30, 2011
- Climate Resilience
Gasoline for evacuations, generators, and emergency response is essential for human well‐being. Rising prices are potentially serious concerns, especially for lower income populations. The politics of price gouging around natural disasters are notorious. At least some gas price increases around natural disasters may be warranted however.
Hurricanes disrupt offshore oil platforms, crude refineries, pipelines and other infrastructure, and local transportation. Higher market prices may help regulate supply, ensuring that gasoline provision covers its costs and actually makes it to those that need it most. Allowing prices to rise may also provide incremental incentives for wholesalers and retailers to acquire additional gasoline in trying times. Given substantial public interest and large benefits at stake, understanding the extent and nature of price changes and price gouging in the wake of natural disasters is crucial.
To explore the causal impact of hurricanes on gasoline prices, we merge forecast and landfall data from NOAA’s National Weather Service with geographic, demographic, traffic, and weather data from a variety of sources. We then explore relationships between those data and gas price data from the Oil Price Information Service (OPIS) to better understand under what circumstances price gouging occurs.