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The problem facing service station operators is that they can't charge a premium for gas when the power fails, to offset the cost of installing generators. It's

The problem facing service station operators is that they can't charge a premium for gas when the power fails, to offset the cost of installing generators. It's seen as "gouging". So there is no incentive to prepare. The meager profit margins on gas sales are not enough.

bryanlarsen 7y ago
The OP did a month's worth of business in 2 days, and the subsequent goodwill generated and publicity gave him a permanent business boost. His preparation was very well rewarded.
- bobakanoosh 7y ago
  And how frequently do power outages of this length happen in a given city? Considering none of the other gas stations had infrastructure in place to handle this event, I would assume it's the first time in decades, or ever.
  - lifeformed 7y ago
    To be fair, being able to increase your prices would have those same downsides too. It sounds like this kind of emergency preparation would have to be publicly subsidized for it to be a common thing.
- stickfigure 7y ago
  permanent business boost / well rewarded That was not claimed by the author. For better or worse, gasoline tends to be break-even for stations - from the operators I've talked to, maybe they make 5 to 10 cents per gallon. They make most of their profit from the shop. A month's worth of gasoline sales might not cover the upkeep and depreciation of the generator. I'm more curious to know if any other stations installed generators after this experience. I wouldn't be surprised if the answer was "no".
PhasmaFelis 7y ago
Gas sales are (almost) a loss leader to get people in the door to buy snacks, drinks, smokes, and lottery tickets. Mattheij's generator had enough juice to run the pumps, registers, and half the freezers. How does the cost of installing and provisioning a generator compare to the cost of a few days of zero sales?
- rtkwe 7y ago
  And not just a few days of zero sales they went through a whole month's worth of gas in that period and presumably sold through a fair amount of their non gas inventory as well.
  - jpindar 7y ago
    And they didn't lose whatever was in the freezers.
cyc116 7y ago
And IMO that's a good scenario where the State should intervene.
- pjscott 7y ago
  The main effect of government intervention in this case is to ensure dangerous shortages of basic goods in an emergency. That seems like an odd policy to cheer for.
  - rtkwe 7y ago
    What? The base level intervention here would be to require stations to have a generator capable of powering the pumps (and maybe the computer systems to accept payments). That's not that big of an ask actually a generator able to do just that won't be very large and it could be fueled directly from their existing storage tanks.
    - pjkundert 7y ago
      - Gov't enforces price controls on basic goods (eg. gasoline) = Nobody delivers gasoline into high-risk areas. Shortages persist. - Prices allowed to float higher on shortages = Lines of trucks can be observed from *orbit*, attempting to enter the area to supply the demand; prices drop almost immediately. Which would you prefer?
      - rtkwe 7y ago
        The issue in the article wasn't an actual shortage of gas, the gas was there it just couldn't be accessed because of the power outage. The pumps and payment processing equipment isn't that power hungry and could be powered by a small generator.
        pjscott 7y ago
        I'm not sure I see much distinction between (a) a shortage of usable gas because nobody is bringing in gas, versus (b) a shortage of usable gas because nobody is bringing in generators to run the pumps. In both cases people could get access to a lot more gasoline if there was enough money to be made by, say, loading up a pickup truck and driving quickly to the affected area. ... But it sounds like you're not arguing for price controls, specifically, but for some kind of government intervention. I agree that requiring backup generators sounds like a much better policy than anti-price-gouging laws, since it's at least not obviously counterproductive.
JumpCrisscross 7y ago
> they can't charge a premium for gas when the power fails We had gasoline shortages a few years ago in New York. I can't find the article now, but a newspaper–The Economist, I believe–noted how supply disruptions for illicit drugs were virtually nonexistent because a small price bump compensated for maintaining inventory. Meanwhile, "price gouging" laws virtually ensured lines at the petrol stations.
- RyanAF7 7y ago
  Good point, I wonder how many times states have suspended taxes on gasoline during such times. Would be surprised if it was any.
- DangitBobby 7y ago
  >Meanwhile, "price gouging" laws virtually ensured lines at the petrol stations. Or maybe it was limited supply... Demand for gas seems fairly inelastic.
  - solotronics 7y ago
    I believe this to be false. If the price for gas went to $30/gal in a city in the US there would be tanker trucks, boats, and hotshots with tanks in the bed lining up to get into town. Alternative means of transporting the gas into a disaster area would become economical if the price increases enough. The shortage is created by restricting the free market price.
    - dredmorbius 7y ago
      In numerous parts of the country, there is limited cross-transfer capacity (pipelines, etc.), and worse, formulation requirements and regulations which make fuel for one region unacceptable in others. Because of flammability, petrol itself is generally not hauled long distances, but is instead refined locally and trucked to service stations. There are some petrol pipelines and marine transports, but those tend to be more problematic than unrefined crude.
knob 7y ago
This is a cool real-life example of Taleb's antifragility. In Puerto Rico, gas stations have had backup power generators for years (way before Hurricane María 2017). The power grid is so crappy that the generator turned out to be essential for normal business. And the owners couldn't increase the price over pre-set parameters (Puerto Rico's DACO sets those). Meager profit margins on gas sales have been irrelevant in this situation. Once Joe down the avenue installs a generator on his gas station, you have to keep up with the Joneses. So antifragility made it happen: the impact of lost-sales wasn't enough to bring down the gas station... yet enough of a stressor to push the installation of backup power generators. As an aside: From the people of Puerto Rico, thanks again to all the beautiful people from the States that came over to help. Thank you.
- mywittyname 7y ago
  Why do people say antifragile instead of robust?
  - DuskStar 7y ago
    IMO it's the difference between a really strong piece of ceramic that happens to not break when you whack it with a hammer, and something like safety glass that shatters yet stays intact. The ceramic is robust, but with a big enough whack it'll shatter into a million pieces - but the fragility of the safety glass is known and prepared for to the point where it breaking doesn't lead to a complete failure.
  - twic 7y ago
    Sounds smarter.
  - rwallace 7y ago
    Because they mean different things. A robust system is one that can tolerate stress without suffering much harm. An antifragile system is one that actually benefits from stress.
  - kgermino 7y ago
    DuskStar is pretty close. Anti-fragile describes systems that improve from disorder. Robust describes ones that resist disorder. The ceramic plate is robust: it’s very strong, and unlikely to break when things go wrong (e.g. it gets dropped). But it’s not anti-fragile, it will never be made better by dropping, at best it won’t get worse. The petrol market in Puerto Rico is anti-fragile because the disorder of small power failures made it better, they added backup power so that the system would be more robust next time the power went out.
komali2 7y ago
The article said they sold several weeks worth of gas in two days. That's gotta be worth something, now? Regardless of margins, that's just more money straight into the pocket.

bryanlarsen 7y ago

The OP did a month's worth of business in 2 days, and the subsequent goodwill generated and publicity gave him a permanent business boost. His preparation was very well rewarded.

bobakanoosh 7y ago
And how frequently do power outages of this length happen in a given city? Considering none of the other gas stations had infrastructure in place to handle this event, I would assume it's the first time in decades, or ever.
- lifeformed 7y ago
  To be fair, being able to increase your prices would have those same downsides too. It sounds like this kind of emergency preparation would have to be publicly subsidized for it to be a common thing.
stickfigure 7y ago
permanent business boost / well rewarded That was not claimed by the author. For better or worse, gasoline tends to be break-even for stations - from the operators I've talked to, maybe they make 5 to 10 cents per gallon. They make most of their profit from the shop. A month's worth of gasoline sales might not cover the upkeep and depreciation of the generator. I'm more curious to know if any other stations installed generators after this experience. I wouldn't be surprised if the answer was "no".

PhasmaFelis 7y ago

Gas sales are (almost) a loss leader to get people in the door to buy snacks, drinks, smokes, and lottery tickets. Mattheij's generator had enough juice to run the pumps, registers, and half the freezers. How does the cost of installing and provisioning a generator compare to the cost of a few days of zero sales?

rtkwe 7y ago
And not just a few days of zero sales they went through a whole month's worth of gas in that period and presumably sold through a fair amount of their non gas inventory as well.
- jpindar 7y ago
  And they didn't lose whatever was in the freezers.

cyc116 7y ago

And IMO that's a good scenario where the State should intervene.

pjscott 7y ago
The main effect of government intervention in this case is to ensure dangerous shortages of basic goods in an emergency. That seems like an odd policy to cheer for.
- rtkwe 7y ago
  What? The base level intervention here would be to require stations to have a generator capable of powering the pumps (and maybe the computer systems to accept payments). That's not that big of an ask actually a generator able to do just that won't be very large and it could be fueled directly from their existing storage tanks.
  - pjkundert 7y ago
    - Gov't enforces price controls on basic goods (eg. gasoline) = Nobody delivers gasoline into high-risk areas. Shortages persist. - Prices allowed to float higher on shortages = Lines of trucks can be observed from *orbit*, attempting to enter the area to supply the demand; prices drop almost immediately. Which would you prefer?
    - rtkwe 7y ago
      The issue in the article wasn't an actual shortage of gas, the gas was there it just couldn't be accessed because of the power outage. The pumps and payment processing equipment isn't that power hungry and could be powered by a small generator.
      - pjscott 7y ago
        I'm not sure I see much distinction between (a) a shortage of usable gas because nobody is bringing in gas, versus (b) a shortage of usable gas because nobody is bringing in generators to run the pumps. In both cases people could get access to a lot more gasoline if there was enough money to be made by, say, loading up a pickup truck and driving quickly to the affected area. ... But it sounds like you're not arguing for price controls, specifically, but for some kind of government intervention. I agree that requiring backup generators sounds like a much better policy than anti-price-gouging laws, since it's at least not obviously counterproductive.

JumpCrisscross 7y ago

> they can't charge a premium for gas when the power fails We had gasoline shortages a few years ago in New York. I can't find the article now, but a newspaper–The Economist, I believe–noted how supply disruptions for illicit drugs were virtually nonexistent because a small price bump compensated for maintaining inventory. Meanwhile, "price gouging" laws virtually ensured lines at the petrol stations.

RyanAF7 7y ago
Good point, I wonder how many times states have suspended taxes on gasoline during such times. Would be surprised if it was any.
DangitBobby 7y ago
>Meanwhile, "price gouging" laws virtually ensured lines at the petrol stations. Or maybe it was limited supply... Demand for gas seems fairly inelastic.
- solotronics 7y ago
  I believe this to be false. If the price for gas went to $30/gal in a city in the US there would be tanker trucks, boats, and hotshots with tanks in the bed lining up to get into town. Alternative means of transporting the gas into a disaster area would become economical if the price increases enough. The shortage is created by restricting the free market price.
  - dredmorbius 7y ago
    In numerous parts of the country, there is limited cross-transfer capacity (pipelines, etc.), and worse, formulation requirements and regulations which make fuel for one region unacceptable in others. Because of flammability, petrol itself is generally not hauled long distances, but is instead refined locally and trucked to service stations. There are some petrol pipelines and marine transports, but those tend to be more problematic than unrefined crude.

knob 7y ago

This is a cool real-life example of Taleb's antifragility. In Puerto Rico, gas stations have had backup power generators for years (way before Hurricane María 2017). The power grid is so crappy that the generator turned out to be essential for normal business. And the owners couldn't increase the price over pre-set parameters (Puerto Rico's DACO sets those). Meager profit margins on gas sales have been irrelevant in this situation. Once Joe down the avenue installs a generator on his gas station, you have to keep up with the Joneses. So antifragility made it happen: the impact of lost-sales wasn't enough to bring down the gas station... yet enough of a stressor to push the installation of backup power generators. As an aside: From the people of Puerto Rico, thanks again to all the beautiful people from the States that came over to help. Thank you.

mywittyname 7y ago
Why do people say antifragile instead of robust?
- DuskStar 7y ago
  IMO it's the difference between a really strong piece of ceramic that happens to not break when you whack it with a hammer, and something like safety glass that shatters yet stays intact. The ceramic is robust, but with a big enough whack it'll shatter into a million pieces - but the fragility of the safety glass is known and prepared for to the point where it breaking doesn't lead to a complete failure.
- twic 7y ago
  Sounds smarter.
- rwallace 7y ago
  Because they mean different things. A robust system is one that can tolerate stress without suffering much harm. An antifragile system is one that actually benefits from stress.
- kgermino 7y ago
  DuskStar is pretty close. Anti-fragile describes systems that improve from disorder. Robust describes ones that resist disorder. The ceramic plate is robust: it’s very strong, and unlikely to break when things go wrong (e.g. it gets dropped). But it’s not anti-fragile, it will never be made better by dropping, at best it won’t get worse. The petrol market in Puerto Rico is anti-fragile because the disorder of small power failures made it better, they added backup power so that the system would be more robust next time the power went out.

komali2 7y ago

The article said they sold several weeks worth of gas in two days. That's gotta be worth something, now? Regardless of margins, that's just more money straight into the pocket.