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Not so unfathomable or mystifying

Posted By Russ Roberts On March 30, 2011 @ 10:42 am In Energy,Man of System,Prices | Comments Disabled

In the aftermath of the tsunami, Japan is suffering from a fuel shortage.

[1]

 

H. T. writes at The Economist [2] (which is also the source of the photo):

IT IS almost unfathomable. As seen during 17-hour drives to and from the tsunami-hit north-east of Japan this week, the country appears to have ground to a halt, hit by a mystifying shortage of fuel. Added to rolling power cuts, I predict the consequences for this quarter’s growth will be severe. From Tokyo northwards, drivers turn off their engines and park in single file for hours, waiting for their 20-litre rations. Tokyo’s police report that the theft of petrol has become widespread, with at least 40 cases of illegal siphoning from car parks around the capital. Petrol-pump attendants along the route north say that the shortages are due to the supplies having been diverted to the stricken coast. But in Miyagi prefecture, scene of much of the devastation, the petrol queues are even longer—miles longer, literally. Drivers wait all day to get to the pump. Worse, the fuel shortage means that supermarkets, convenience stores and other businesses are shut, unable to get fresh products. In evacuation centres for tsunami victims, so-called “food refugees” are joining the queue for a bowl of hot soup—these are people whose homes are still intact, but who have run out of food nonetheless.

Why, you might ask?

H. T. goes on to talk about the refinery that was knocked out by the earthquake/tsunami and the bureaucratic snafus that contrbuted to poor distribution:

Yet the Ministry of Economy, Trade and Industry (METI), which handles fuel distribution from its darkened offices in Tokyo (the lights are switched off to save energy), acknowledges there has never been a supply shortage in Japan as a whole. Refineries in western Japan have increased output to make up for the shortfall further north.

About a week ago, officials dispatched 200 lorries with fuel to the stricken areas, but another 100 appear to be waiting in reserve. Why, when they too should be hurtling up north? The biggest problem appears to be private-sector stockpiling, and flimsy half-measures by the authorities to overcome that. When the crisis hit, there was a law on the books requiring energy companies to keep 70 days of petrol in reserve. This was quickly lowered by three days, but that did not help. And there is the outrage. It was not until March 21st, ten days after the crisis, that the limit was lowered to 45 days. Yet still METI can only use “administrative guidance” to persuade companies to release their hoards of fuel. A big stick would be better.

This reveals a bureaucratic problem that the crisis has thrown into sharp relief. Japan has no system for overriding petty rules and regulations to cope with an emergency. People trying to deliver supplies to the needy complain about this in a myriad of ways—above all, in access to trunk routes which are still empty (and largely undamaged), save for a few emergency vehicles…and journalists’ cars. (The Japanese media, which tend to report slavishly what the government tells them, have been shockingly lax in reporting the food-and-fuel crisis in the afflicted areas.)

Here’s an idea. Let people buy and sell fuel freely. Evidently that is not part of the Japanese system. Shortages are actually quite fathomable–they come from a price ceiling. Prices go unmentioned in the article.

Near the end of the article comes this:

If Japan’s establishment were not so bunker-headed and convinced that it knows all the answers, it would have created a war room, brought in experts from the real world, and declared a state of emergency to get the fuel up north. Only now are supplies starting to arrive.

As our blog’s namesake once wrote–the curious task of economics is to illustrate to men how little they know about what they imagine they can design. Japan doesn’t need a war room or experts. Just a little economic freedom.

 

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[1] Image: http://cafehayek.com/site/wp-content/uploads/2011/03/Petrol-000_Hkg4699584-595.jpeg

[2] writes at The Economist: http://www.economist.com/blogs/banyan/2011/03/japans_compound_crisis?fsrc=scn

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