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Comment by baggy_trough | Hacker News Reader

Why ration rather than raising the price to whatever balances supply and demand?

That might work if airlines bought most of their fuel in the spot market. But major airlines tend to hedge their fuel prices, buying fuel that doesn't exist yet for a guaranteed price. If the shortage is severe enough, that fuel might not be delivered, leading to worse disruption than high prices alone would have caused.

Perhaps because oil is not a luxury good, but an absolute requirement for a functioning economy. I imagine the consequences of literally running out of jet fuel would cripple cargo transport, among other things.

Then the price will go up a lot.

They have the data already of the max price customers will pay

Why the downvote?

You can fly to the EU for 600 USD (retour), more in high season. Non business people are willing to spend 1200, 1400 USD. I assume around 2000 USD the demand will fall off significantly. At 5000 USD for economy it will be close to zero.

I just booked for the fall to London. Roundtrip was around $1200 from eastern US in economy with a couple of minor upgrades which is high but not ridiculous. The increment is basically a couple nights of hotels and meals. I've paid more; I've paid less. Was going to take ship back but it wasn't available for one person.

Massive price jumps in fuel enables panic buying. Fuel prices will be driven by both fear and scarcity, and prices go even higher.

Jet fuel isn't exactly a consumer good. Storing large quantities of it isn't exactly easy. It doesn't strike me as a good that is likely to panic bought.

The UK does already have salt cavern storage for crude and natural gas, so it would be possible to make sites for kerosene if not for the present shortage.

Right - more of a danger of bullwhip effect than a consumer panic purchase. Still it is best to ease the spikes for everyone with rationing.

Doesn't matter what the price is if there isn't enough for sale

Unless there's a single buyer, or at least a coordinated decision of "above this price, we all buy nothing, and below this price we all buy our normal amounts", it truly does matter what the price is when there's not enough for sale.

The price is determined by who needs it the most and is willing to give up the most cash. Instead of rationing by lines, or fixed quantities, it's allocation to those who can either make the most out of the jet fuel, or those for whom money is the least valuable.

That's not how supply and demand works.

Thats exactly how supply works. Unless you're saying I can still buy fresh wooly mammoth meat somewhere if I just offer enough money

Mammoth meat does not exist. Fuel does exist.

And when your supply of jet fuel is cut off? If you don't ration and let the free market decide how to allocate it, how long do you think it lasts until you say "jet fuel doesn't exist"?

A very long time, certainly much longer than rationing! That's the whole point of raising the price.

The scenario being faced is not a complete cession of the existence of jet fuel, it is a supply shortage. There is a split based on pre-existing contractual obligations: absent such obligations, who offers the most money, gets the fuel; But those who have pre-existing contractual obligations they find cannot be met, they default on those obligations.

Rationing can be useful when a government decides the market is allocating contrary to the national best interest, for whatever reason. As with market pricing, it's not going to magic new resources out of nowhere.

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