I remember one time I was driving and driving looking for a station that had gas, until I finally ran out. My engine died and I had to park. I left my car and carried a gas can to a nearby gas station, went inside and asked if they knew anywhere I could get gas. The station attendant admitted that they did have gas, but only a little bit, so they didn't want to open up because people would line up and then be angry when the station ran out before they got to the front.

He took pity on me and let me fill my gas can, but he led me out to the pump and we both had to crouch down behind the pump so that we weren't visible from the street. "Make sure nobody can see us," he said. "I don't want to get mobbed."

That's how it was back then. Black market transactions, people doing and trading favors, having to waste hours waiting in lines. It was like something out of the worst of Soviet communism.

Price controls were a big failure. As far as rationing, I can't imagine who will decide which of the millions of Los Angeles commuters deserve to be able to drive to work. I just don't see a system like that being workable in our complex society.

Letting the price float isn't going to be popular either, but at least it avoids creating a black market and it lets people decide how to trade off gasoline against other things they might go without. And I know this doesn't get any points around here, but it also happens to be economically the most efficient way for society to adjust to a shortage.

Stock index futures moved up on the news; crude down (hasn't affected natural gas as much but they dipped too).

I suspect crude will be higher by end of day or by tomorrow once this news is discounted.

Bigger news would be they've got the pipelines for up and running again.

http://mdahmus.thebaba.com/blog/archives/000019.html

In the areas worst hit by Katrina (N.O., Gulf MS & AL), fuel use will drop anyway: no commuting for employment, washed-out roads and bridges, and little economic activity other than rehab and rebuilding.  In N.O., more than 400,000 potential consumers are simply not in the metro area and will not be allowed back soon, thus keeping them in areas where the existing infrastructure (energy and otherwise) can more readily support them.  

Authorities will also affect consumption through non-price means: curfews to control looting, restrictions on driving to keep roads clear for emergency vehicles, limits on access to areas and roads, delays for road repair, and prohibitions on the return of refugees to their homes.

So we are probably left, for better or for worse, with purely a market based solution.  We'll see a shift to more efficient vehicles, and the speed of that shift will be driven by gasoline prices.  If prices go high, expect a rapid shift (as in the 70's).  If prices fall, expect another round of complacency.

One carrot that might seem tangental to all this discussion of oil is to simply make dense urban living more affordable, more enjoyable, more family friendly. People in dense cities with good mass transit just flat out don't need cars for much except leisure excursions.

This means taking about improving schools, parks, making housing more affordable, etc. We can't just bash drivers into submission and tell them to stay home in their suburban dream homes. We need to stem to flow of new families from the city into the suburbs, we need to connect more communities to good mass transit, and lower taxes in urban areas as much as possible.

Gas taxes are not going to achieve this culture shift alone. We need to think more systemic. People don't factor gas prices into their decision to live in the suburbs - they move there for better schools, better neighborhoods, lower crime, more affordable living spaces, etc.

If we can invest in improving more dense/urban living areas then we are going to achieve more in the long term than slightly higher gas prices.