Gas Prices/Gas Shortages

[jefnvk]

Once again, Mike is right on.

 

[Waitone]

Coronach, from one point of view you are correct. Different view, an across the board drop in cost without a change in supply may or may not increase demand. I suspect what will happen in pricing will equilibrate at a different level given the same supply. To the extent demand varies will provide a decent estimate of demand elasticity. I suspect demand in the aggregate for a wheeled society is pretty much inelastic. That is why governments love to tax things like cigarettes (inelastic demand due to nicotine and tar addiction) and gas (demand is essentially fixed). Fixed demand results in constant stream of revenue to taxing authority.

From a political view, a suspension of taxes by relevant taxing agencies will serve to drive home the point that it is government that is the profiteer. It is government that is the source of limits on supply. It is government (particularly in the case of NC) that will profit from the hardship of its citizens. In reality, removing taxes will be symbolic but symbols at time drives reality.

 

[Control Group]

Any reduction in price, either via tax reduction or a simple price cap, will increase demand while doing nothing to increase supply. The result will be a shortage.

I was with you right up until this statement. Or rather, I'm even in agreement with this statement, but you're not following economics the next step down the road.

In WI, we're paying $0.42/gal in taxes, total. 87 octane regular (at least, near my apt) is selling at $3.259. If the tax were to be eliminated, one of two things would happen, depending on the supply situation.

1) If the supply of gasoline to the station is essentially unrestricted, the price would drop to $2.839 (or thereabouts), reflecting the real lower cost of gasoline to the station.
2) If the supply of gasoline to the station is facing a real shortage, the price would either drop less than $0.42, or stay the same. That is, it would stabilize around the supply/demand intersection given the position of the supply curve.

You can't argue that stations will raise prices to maintain their supplies, then also argue that government shouldn't drop taxes because stations will run out of gas. If running out of gas is the issue, then government will not be able to make the price go down. All they can do is change the percentage of the price that goes in their pockets, since stations will raise prices to maintain supply.

What it comes down to is that the government taxation of gasoline is an external influence on price that is not related to supply/demand (or at least, it's not a dependent variable on either supply or demand). It is a leech on the marketplace, and removing that leech will not cause the marketplace to fail, which is what you're implying.

By the same token, in areas with real shortages, it also won't cause the price of gas to decrease. But that doesn't mean elimintating the tax is a bad idea.

 

[Flyboy]

However, Mike, I'd also argue that laws like the one in Georgia that automatically increase taxes when prices climb above a predetermined threshold are also an unwelcome interference in the market. In theory, it should help to further ration limited supplies, but I don't think artificial price management is a good thing either way. And, given that the artificial increase goes to the government, not the actual supply chain, I'd say it really is profiteering.

Not to mention that the government probably exempts itself from paying taxes, so it's effectively subsidized. I don't know if NC has the same policy as GA, but if that's what Waitone was talking about, I think reducing taxes in the form of rescinding the automatic increase is probably appropriate.

 

[Flyboy]

BTW, just a clarification: a lot of people have talked about reduced demand as a result of the increased prices. Demand does not decline in response to price; quantity demanded is responsive to price. Demand shift is when the entire demand curve shifts (ditto with supply and quantity supplied). If anything, demand has probably increased due to the fuel-intensive rescue and transport operations in the New Orleans area.

The difference between supply and demand and quantity supplied and quantity demanded was aggressively beaten into my head with a cluebat when I took econ, and it's an important distinction.

 

[Borachon]

Many of our stations in Mississippi are out of gas.

The refinery capacity at Louisiana was about 16% of the country. That 16% wasn't distributed thru out the country. Most of it was sold in the South. Now the South has had 100% of it's refined gas cut off.

The South and anybody else that bought Louisiana refined gas will experience a shortage. Simple enough to look at and understand.

 

[Coronach]

Flyboy, Waitone, Control Group-

OK, I was trying to keep it as simple as possible, since people cannot seem to even grasp the basics. And, frankly, I'm not an economist anyway (but I did stay at a Holiday Inn Express last night), so I'm leery of stepping too far out of my depth.

In any event, suspending interfering taxes like GA's would not hurt, but neither will they help. The only thing reduction of tax does is make the price at the pump lower, which will allow people to buy up more of a limited supply. That, or it will cause a, say, $0.40 reduction in the price from taxes, and an immediate $0.40 increase in base price. I understand the government-profiteering angle, but in the most basic supply-demand sense, the only thing that matters is the price at the pump, not where the money goes after it is collected.

I understand (and agree with) you, Control Group. My point is that if you remove the tax the market will adjust...and will do so by driving the price (as paid to the retailer) higher, unless there is a change in supply. The net result will be:

1. Less revenues to government (small loss)
2. More PO'ed leftists, who will just accuse the gas stations of price gouging again.
3. No increase in gas in the holding tanks
4. No increase in gas in my own tank.

The only way to beat this is to increase supply or reduce demand. Demand will stabilize shortly, as everyone gets their tanks and hoarding supplies topped off, and rate of purchases will fall to the rate of actual consumption.

Supply is more iffy. Short term it will be OK. How long until the refining shortfall hits, though? And where will it go from there?

Mike

 

[Coronach]

To clarify:

Short term will be OK except in the south. If they've exhausted on-hand supplies and the pipeline to move the refined gas is compromised, supply wil continue to be tight.

And, to clarify again,

Reducing the taxes, in and of itself, will do not harm. It will also do no good whatsoever. Government, however, shouldn't do it, because if they do, people will expect a price cut. One of two things will happen:

1. They'll get it, and supply will dwindle further. (This was my original point)
2. They won't get it, and we'll all be forced to listen to people who slept through econ 101 speculate about how the Oil Companies are lining their pockets at our expense. Again. (this is Control Group's counter-argument, with which I agree)

Neither one is a winner.

Mike

 

[GunGoBoom]

Gas pricing has always bothered me. If they bought the supply that is in their current tanks underground at a certain price then why should it go up before they get the next higher priced supply?

Because it's their gas, so they can charge whatever they feel like (provided they don't have a monopoly). That's what capitalism is all about. Theory being.... don't like it? Go to a competitor or procure your own gas or don't drive. Simple supply and demand in a capitalist system - works VERY well 99.9% of the time.

 

[R.H. Lee]

OK here are the numbers on my road trip yesterday. 348.3 miles used 7.951 gallons (@ $2.979 per gallon-today's local price). That's 43.81 mpg. That's traveling at 80+mph with the a/c running, and a period where I got stuck in stop and go rush hour traffic for 20 miles.

Gasoline prices were steadily rising before Katrina. The reason there are shortages in some parts of the country have nothing at all to do with price. Let me repeat that; shortages do not exist because the price was too low. There are shortages because the hurricane knocked out refineries and distribution lines. In other words, it's physically impossible to get gasoline to some parts of the country. If it cost $25 per gallon, there would still be no gasoline. Got it?

 

[chaim]

On radio news I had heard that, in addition to the lost refinery capacity (which will cause increased prices, and hardship through this winter), pipelines serving much of the nation (including, at least partially, this area) are down. They will likely have at least reduced capacity for weeks. This expert they were interviewing predicted that if the pipelines aren't back up within days we'd be seeing 1970's style gas lines and shortages.

Some areas are already seeing this. I'm glad I'm not in Atlanta.

Around here some gas stations are running out of gas, and others are being limited by their suppliers as to how much they can sell per day.

The gas stations only have enough stock for 1-3 days (depending upon the area). The suppliers may have a couple weeks worth. With a decreased supply for a while we will be facing shortages, but outside a few limited geographic areas it won't be an outright crisis.

As for local prices, most stations around me were 2.72-2.79/gal just a couple days ago. Two days ago on my way to work a local station was still $2.72/gal but I didn't have time to fill up. On my way home from work when I filled my tank the same station was $2.99. Yesterday on my way to work (only a few hours after filling at $2.99) it was $3.09. There is a nearby station that is charging $3.45.

As for the "gauging" conversation...stations charging what most in the area are charging are not gauging. Around here that means anything from $3-3.15/gal isn't under or overcharging. However, those charging $3.40 probably are.

Short term gas price will get ugly. So I don't begrudge those who want to keep their cars full (I will be keeping my tank full for a while). Medium-term (months?) gas will probably stay over $3/gal. However, once refineries in NO, pipelines in the area, and offshore wells are back online (months to maybe a year) things should be nearly back to normal.

That said, I am going to watch things closely. I bought a mid-sized car (Hyundai Sonata) a year ago. I wanted the extra comfort and after a car crash messed up my back a couple years ago I wanted the extra safety of the larger car. However, I only get in the upper 20s MPG in the winter without AC (not bad) and around 22MPG in the AC months (minimum 6 months and really around 7 months around here) even with the 4cyl engine. If gas breaks $4 or $5/gal and stays there much more than a month, if it stays over $3.50 for more than 6 months, or if it stays over $3 this time next year, I'm not going to have much choice but to replace it (and I love my car). I just won't be able to feed it (my new job was a big pay cut, and I'm about to be a grad student again, I can't afford big fuel cost increases). I'm already pricing used Volkswagen Golfs and Jettas with the TDi engines and used Civic Hybrids and Toyota Priuses.

 

[Control Group]

Gasoline prices were steadily rising before Katrina. The reason there are shortages in some parts of the country have nothing at all to do with price. Let me repeat that; shortages do not exist because the price was too low. There are shortages because the hurricane knocked out refineries and distribution lines. In other words, it's physically impossible to get gasoline to some parts of the country. If it cost $25 per gallon, there would still be no gasoline. Got it?

You can repeat that all you want, that doesn't make it true.

Interruptions of the supply of gasoline do not make gasoline that's already been delivered somehow vanish. Prices spike to preserve the supply of gasoline that's already on hand, precisely because there isn't any more en route.

Given that stations can't be resupplied, which station do you think is going to run out of gas sooner: the one selling it at $2.50/gal, or the one selling it at $25/gal?

If you answered the one selling at $2.50/gal, you're right. You've also just demonstrated why shortages result from underpricing: at the end of the week, the one selling at $2/gal will be out of gas. The one selling at $25/gal will not. Thus, the shortage at the first station. Caused by underpricing.

If, on the other hand, you answered the one selling at $25/gal, I'm very curious as to your raionale.

 

[R.H. Lee]

Regardless of whether the price is $2.50 or $25 per gallon, the supply has been cut off. The station selling for $25 per gallon has no more gasoline on hand than the one selling at $2.50. Nobody will buy from the $25 seller until the $2.50 seller runs out, then enough people will buy from the $25 seller until his supply is exhausted, and that will be quick. A high price does not guarantee availability, yet you continue to assert that it will. There is no gasoline in some areas because of the hurricane. Excessive prices did not change that eventuality.

 

[Flyboy]

Regardless of whether the price is $2.50 or $25 per gallon, the supply has been cut off. The station selling for $25 per gallon has no more gasoline on hand than the one selling at $2.50. Nobody will buy from the $25 seller until the $2.50 seller runs out, then enough people will buy from the $25 seller until his supply is exhausted, and that will be quick. A high price does not guarantee availability, yet you continue to assert that it will. There is no gasoline in some areas because of the hurricane. Excessive prices did not change that eventuality.

You're missing the point. The supply hasn't been cut off, the resupply has been cut off. You're right when you say that filling stations are left with only the supply on hand, and you're right when you say that people will buy the cheap stuff before they buy the expensive stuff. However, you're completely failing to consider that an increase in price will cause people to use less, extending supply.

Right now, gas is about $3/gallon here in Norman. I'm going to go to the range and go hunting tomorrow. It's not that big of a deal to me. If it were $5/gallon, I'd stay home. At $10/gallon, I'd be walking or biking everywhere I go, and at $25/gallon, I'd be increasing supply by siphoning my own tank and selling the contents. In any case, as price goes up, quantity demanded goes down. People will cut their use for nonessential purposes.

When you have a (temporarily) fixed quantity supplied, and quantity demanded per unit time goes down, then the supply will last longer. That "longer" means that The Powers That Be have more time to find a way to get more fuel in. Right now, there are exactly two limiting resources in the fuel crunch: 1) manpower, and 2) time. More manpower means that work gets done more quickly (up to a point). The second limiting reagent, time, is the big one: some things just can't be done any faster. The only way to surmount those obstacles is to wait. Through rationing, the available fuel can be extended to last for the duration of the wait. As it turns out, and as several people (including myself) have explained, the market provides its own natural rationing devices in the form of price increases. The fuel supply will last longer because fewer people will be willing to stomach the price.

Incidentally, this is the very same concept that explains oil prices (and any other commodity). I keep hearing people say "we're running out of oil!" We're not. We're just running out of $40/barrel oil. There seems to be plenty of $70/barrel oil, and when that runs out, I'll bet we can find some $100/barrel oil down there somewhere. When supply runs thin, throwing money at the problem causes more to be found, while reducing the quantity demanded and stretching the limited quantity available a lot further.

 

[Control Group]

Regardless of whether the price is $2.50 or $25 per gallon, the supply has been cut off. The station selling for $25 per gallon has no more gasoline on hand than the one selling at $2.50. Nobody will buy from the $25 seller until the $2.50 seller runs out, then enough people will buy from the $25 seller until his supply is exhausted, and that will be quick. A high price does not guarantee availability, yet you continue to assert that it will. There is no gasoline in some areas because of the hurricane. Excessive prices did not change that eventuality.

No, I do not assert that. I assert that a high price will delay running out of gasoline. Unless you believe that there will never be resupply of gasoline, it's possible to delay running out for long enough that you get resupplied before it happens, which is why prices have gone up.

For what you say to be true, you have to accept at least one of the following premises: either there will never be a resupply of gasoline, in which case no price will be high enough to stretch the supply long enough. Or, people will buy the same amount of gasoline regardless of price, in which case changing prices will have no effect on how quickly one runs out.

The former is almost certainly untrue. We have every reason to think that the gasoline supply chain will, at some point, resume operating to some extent.

The latter is also untrue, if for no other reason than that if you raise the price high enough, some people who would like to buy gas will simply not have the money to do so, even if they're willing to pay it. I burn almost six gallons of gas a day over a 210-mile round trip commute to work. Since I need to keep earning my paycheck, gasoline is my first spending priority. But, at $25/gal, gas would cost far more than I earn, so I have to stop buying it. This will mean the gas station I frequent has a supply which lasts longer.

The logic is very simple. Stocks last longer the higher the price, because fewer people will/can buy gasoline. If the station can make them last long enough, they will still have gas available right up until resupply is possible. Hence, gas stations increase the price in order to make their stocks last longer. If the stocks don't last long enough, then the price wasn't high enough. They now have a shortage caused by underpricing. By extension, this means that stations already out of gasoline have already failed to price their stocks correctly: they're just further down the timeline.

This is all straightforward economics. The scarcer the supply, the higher the price at any given level of demand. The higher the price, the lower the quantity demand.

 

[c_yeager]

Whenever a station goes empty due to increased demand it is *always* a result of a psychological reaction among the populace.

Think about it. People use a finite amount of gas. You burn the same amount of gas going to and from work regardless of anything else. The station has supplied that quantity of fuel every day up untill today, when they run empty. How did people suddenly start consuming mroe gas over night? They didnt, they just heard that something happened, and everyone rushed out to buy gas RIGHT NOW. All it means is that there will be fewer people with empty tanks tomorrow.

People do seem to panic when gas stations run out of fuel though. Its almost like a bank-run, when people suddenly realize that there isnt a magical pit full of cash in the back.

 

[R.H. Lee]

No, I do not assert that. I assert that a high price will delay running out of gasoline.

We're in agreement. However, the delay is insignificant if it fails to last until the re-supply arrives. Such is the case in portions of the east and southeast right now.

I assert that when the re-supply arrives, the prices will be higher than warranted by reasonable operating profit motives, and instead will be dictated by pure avarice and a desire to exploit. That to me is extortion and a reason to place price controls and/or sanctions against gougers. Especially with something as vital to the economy as gasoline. In other words, if the oil/gasoline producers/distributors can't police themselves, public policy will and should regulate them. That's all I'm sayin'

 

[Control Group]

I assert that when the re-supply arrives, the prices will be higher than warranted by reasonable operating profit motives, and instead will be dictated by pure avarice and a desire to exploit. That to me is extortion and a reason to place price controls and/or sanctions against gougers. Especially with something as vital to the economy as gasoline. In other words, if the oil/gasoline producers/distributors can't police themselves, public policy will and should regulate them. That's all I'm sayin'

Fair enough. While I believe that the nature of the competitive marketplace will address the problem of price gouging without government interference, I also understand that this belief is a matter of opinion, which many (including yourself) disagree with.

If you're right about price gouging happening once the throttling of supply is no longer a real factor, then I agree that dealing with it is a legitimate function of government. I would argue for taking the approach of punishing gougers rather than pro-actively setting price controls, since I don't believe price controls, no matter how well-intentioned, will adequately adapt to market forces. But I will accept that actual gouging and/or price fixing should be dealt with.

Again, I think the market will take care of the problem without government intervention, but assuming that it doesn't, I agree with you completely.

 

[Coronach]

We're in agreement. However, the delay is insignificant if it fails to last until the re-supply arrives.

Not quite. If I run a station and I run out of gas on Sunday, I'm screwed if resupply is Saturday. So are my customers. If, on the other hand, I bleed dry on Friday, things are a lot less dire. This is, in fact, the whole point of this exercise. Hopefully the price will rise fast enough and high enough to ensure that supply lasts until the (reduced, but hardly nonexistent) resupply occurs. If not, hopefully it will be close.

Such is the case in portions of the east and southeast right now.

...which is proof positive that they failed to raise price high enough, quickly enough.

I assert that when the re-supply arrives, the prices will be higher than warranted by reasonable operating profit motives, and instead will be dictated by pure avarice and a desire to exploit. That to me is extortion and a reason to place price controls and/or sanctions against gougers. Especially with something as vital to the economy as gasoline. In other words, if the oil/gasoline producers/distributors can't police themselves, public policy will and should regulate them. That's all I'm sayin'

In other words, you're in favor of quasi-socialism. I'm not.

If they price gas too high, people will continue to buy ONLY what they MUST. One of the multitude of retailers will note that gas is overpriced, undercut the competition, and sell more gas, thus making more money. Then the fight to the bottom will be on.

Doing it the other way will cap the price, thus allowing demand to outstrip supply. This will result in shortages, and we'll be right back where we are now.

Now, if you have evidence of price-fixing or collusion, that's a whole other kettle of fish. I have not seen any yet, and the mere fact that gas is expensive when stations are going dry is hardly a sign of it.

Think about it. People use a finite amount of gas. You burn the same amount of gas going to and from work regardless of anything else. The station has supplied that quantity of fuel every day up untill today, when they run empty. How did people suddenly start consuming mroe gas over night? They didnt, they just heard that something happened, and everyone rushed out to buy gas RIGHT NOW. All it means is that there will be fewer people with empty tanks tomorrow.

Almost correct. In tight times people will conserve. In lucrative times, people will consume more. In panic times, people will fill every container they have with gas, and consider buying more. By and large, though, you're correct. This means that the post-Katrina spike will fade rapidly, and should already be doing so.

Oddly enough, gas has been $3.09 everywhere around here for the past two days. Suddenly, I'm seeing $2.99 signs. A ten cent decline in the past 8 hours. It's not universal, even for here, but it is a sign that the market might be subsiding to a more normal level.

There are shortages because the hurricane knocked out refineries and distribution lines. In other words, it's physically impossible to get gasoline to some parts of the country.

The price spiked the day after Katrina wiped out the gulf coast. While what you say is true, especially in the south east, the irrational increase in demand caused the price spike in existing supplies. The inability to efficiently resupply certain areas over the next three days contributed to the problem. The refinery issue won't be felt for a week or so, yet, which is why gas prices will not immediately subside to pre-Katrina levels. They'll drop, but not down to $2.50/gallon, at least not until the refinery output is stabilized.

The hit to our refining capability and the immediate price spike post-Katrina are two separate issues, just as OPEC and gas retailers are two separate groups.

Mike

 

[Derek Zeanah]

I just don't agree that price gouging can actually happen in a market like this, where everyone is selling essentially the same commodity.

Think about it: I decide that the demand curve for gas is fixed, as everyone needs to drive, right? So I decide to get rich by selling gas for $100/gallon. More than $1,000 per tank - mua ha ha ha!

Except...

No-one will buy it. Not even at $100/gallon, or even $10 per gallon.

I could decide to collude with all the other sellers in the area to raise rates to $10 per gallon (already illegal), but then all it takes is one person to sell his fuel for $7 per gallon and the scheme is broken -- he gets rich, and my cashflow is zero.

What you end up with is margins that are barely enough to stay in business -- it's how markets work. Gas stations end up making money on twinkies, chips, candy, and lotto tickets. Gas is essentially sold at cost.

You can't gouge. What you can do is allow your rates to go up in response to supply, so you've got a steady stream of twinkie buyers through the rest of the week instead of selling out on Monday and losing all your business -- remember, twinkies pay salaries, and a big cardboard sign saying "no GAS 'til SATURDAY" means no twinkie sales, but you've still gotta pay your employees.

You end up with a situation where prices jump to the point where most people don't want to pay them, but the UPS and ambulance and Fire Department and milk delivery folks can still get it. If prices don't go up, then supplies get depleted, and those folks we all agree should be able to buy gas because their need is provably greater than our need to go buy ice-cream, can't.

This applies to stuff like generators too. Yeah, it sucks when I can't buy a $300 generator for less than $2,000 and it sucks to live without air conditioning in a humid southern summer. But there are folks willing to pay $2,000 per generator (like the old folk's home down the street trying to keep feeble old ladies alive), and they can because all the cheap bastards like me weren't allowed to suck up all the available units.

You know what's better? The guy smart enought to buy generators sees the profit, and orders 5 times the number for next year on the off-chance that they'll be needed. If not, he can sell them at cost at the end of the hurricane season and cheap bastards like me can get them then.

Works for everyone. Certainly better than centralized control.

 

[jefnvk]

Once again, those saying the rise in price is due strictly to greed have yet to show an example. Show me some examples of what gas costs to the retailers, what it is projected to cost to them next week, and what they are selling for, plus how much they would normally make on gas.

Until someone can do that, I am going with the more reasonable and much more likely explination that they are trying to either save the supply they have, or make enough to pay for the next fill up.

 

[pete f]

The price of gas is usually set by the wholesaler not the retailer and the retailer will use the price of the gasoline in the ground OR the cost of the gas to refill his tank in the ground. which ever is higher.

I drive a diesel jetta, i get 56 Mpg most days. if it is hot I can get 59 to 61 Mpg. it still affects me. I have a new sprinter Van. from dodge. that gets triple the gas milage that my old Ford E350 econolines.

What bothers me is the person who drives 40 miles a week who demands to stop and spend time in a gas line on the fear that "theres a gas shortage coming.'

 

[R.H. Lee]

In other words, you're in favor of quasi-socialism. I'm not.

That may be a whole 'nother discussion, but it is no less than a knee-jerk reaction ignoring the realities of the corporate/government incestfest that rules economics.

If they price gas too high, people will continue to buy ONLY what they MUST. One of the multitude of retailers will note that gas is overpriced, undercut the competition, and sell more gas, thus making more money. Then the fight to the bottom will be on.

Uh huh. That's the way it's supposed to work. I haven't seen a 'gas war' in what??? 30-40 years??

Gasoline (& diesel) is the primary substance that fuels this (and the world's) economy. Not only is its availability vital, but it must be priced at a level that allows industry and commerce to thrive. When the small group that controls supply (re-supply) frivolously manipulates price and availability the result is an increase in the cost of everything and a lower standard of living for everyone. Corporate tyranny is ok by you but government regulation is by definition socialism. At some point common sense needs to override blind ideology.

 

[tomhorn]

mobile oil has payed off all there outstanding bills bought back all there stock and put 9 billion dollars in the bank . since jan 05 wow some body is making money .
As for overseas 22 per cent uneployeement some countries have 3 months vacations .
mom and pops dont set the price people selling them the gas sets the price they raise the price to pay for it .
oil companies are true Americans makes me sick .

 

[R.H. Lee]

Ergo, there is another consideration impacting price. Namely, the tendency of the sheep to run en mass to the pumps and tank up whenever something scary happens, and the reality of over-the-top reactions to the exhaustion of on-hand supply, which is what is happened in Atlanta when everyone ran to the pumps at once.

Uhhhhh....there were a whole lot of people trying to get away from a hurricane. That might cause an increase in the demand for gasoline, and hardly qualifies them as sheeple.

The "oil monopoly" has zilch to do with this sudden price hike in gas. This is 100% the retailers, trying desperately to have something to sell for the next week. Think they're making a killing on gas? Try having zero income for a week on for size. Mom and pop places could go under after a few weeks of that.

How can the retailers be solely responsible, when their costs are steadily increased by the producers? You can't have it both ways. There is a small group who control the refineries and distribution; they are the monopoly. They have been increasing prices and their profits are at record high levels. That is hardly the definition of a 'free market'.