LPG: Lessons in Pricing from Gas

Rising prices are good for you. I just had this apparently strange notion beautifully illustrated to me.

I just bought some 9kg gas bottles for my heater. This may not sound remarkable, but if you were in Johannesburg last year you would remember that after the first cold snap gas couldn’t be had for love nor money. The shortage lasted most of the winter. At the time, the typical price of a 9kg refill was around R100. I offered one fellow ten times that, and the only response I got was from a petrol attendant who overheard the conversation. “Eish, don’t they want to make business?” I shrugged ruefully. He was the smartest guy I’d met that day.

Now, the price is R170. At 70% year on year, that’s a pretty damn hefty hike. However, this winter there isn’t a shortage. Not even the small corner petrol stations have run out, despite what must be a temptation among consumers for pre-winter hoarding. Which just goes to show that rising prices serve to raise supply in order to meet demand. What would you rather have? R100 a bottle but no gas to buy, or as much as you can burn for R170 a pop?

I’m not sure how (or even whether) LPG prices are regulated in South Africa. I’d be surprised if they weren’t, but if you can enlighten me, please do. I heard one lot of cretins want the price capped, to encourage the use of LPG instead of more polluting fuels. Good thinking, fellows. I’m all for less pollution, but you don’t promote something by causing a market shortage.