Editorial: Post-Typhoon Odette ‘price gouging’

·3 min read

A female resident of Barangay Pitogo, Consolacion went to the northern Cebu town’s public market on Tuesday, Dec. 28, 2021, as she wanted to buy new canisters containing liquefied petroleum gas (LPG) for home cooking.

She approached a store that sells LPG-refillable canisters. The Pitogo resident was stunned when she learned that the price for a new LPG-refillable canister was P100. She did not buy one. She left the store and looked for another store that sells the same item at a lower price.

Before Typhoon Odette (Rai) hit Cebu last Dec. 16, the selling price of a new LPG-refillable canister started at around P60.

The demand for food, potable water, LPG, fuel, solar-powered lamps and power banks, among others, has soared in the wake of Odette, the strongest typhoon to hit the disaster-prone Philippines in 2021. There are long lines at groceries and supermarkets, water-refilling stations and gasoline stations, banks and standalone automated teller machines in commercial centers.

Prices of basic commodities have doubled, if not tripled, after the onslaught of Odette, which devastated several areas in Visayas and Mindanao.

In economics’ lens, one could say that the law of supply and demand is at work here. The prices of goods increase when supplies become scarce; the prices fall if the supplies of goods increase. Also, the price rises when the demand for goods increases; the price drops when the demand decreases.

There is another term that describes the increase in prices following a natural disaster. It is “price gouging,” which “occurs when companies raise prices to unfair levels,” Harvard Business School (HBS) said in its article published online.

According to HBS: “There’s no rule for what qualifies as price gouging, but it’s not an uncommon occurrence. Price gouging often occurs when there’s a sudden surge in demand for a given good, service or commodity, such as in the case of natural disasters and emergencies. In times like these, the demand for non-essential items and luxuries dwindles, leading many businesses to lose the sales they normally rely on. To offset this loss, retailers might raise the prices of essential items in an effort to stay in business. On the other hand, when the demand for essential items or services suddenly increases, the supply can quickly become very limited, further increasing prices.”

On Monday, Dec. 27, President Rodrigo Duterte warned that owners of businesses in Odette-hit areas who are taking advantage of the situation by unreasonably increasing prices of basic goods and construction materials will be held accountable. Trade Secretary Ramon Lopez told the President that there is a price freeze in these areas, including Cebu.

Jacking up prices for the pure pursuit of profit is surely appalling because it does not alleviate the misery of disaster-stricken people.

However, some traders may defend themselves by reasoning that it is just the nature of their business–they just go with the flow of the law of supply and demand.

“Economists argue that taking advantage of a boom in demand is a reasonable aspect of a market-based economy. But professionals often find themselves walking the line between raising prices enough to stay in business and remaining fair to their customers,” said the Harvard Business School article.

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