On the other hand, profits have increased to operators of refineries that were not damaged by Katrina because the damage to Gulf oil refineries raised the wholesale price of gasoline, the main product of refineries. However, the higher prices and greater profits induced undamaged refineries to squeeze greater production out of their limited capacity, and companies hastened to repair the refineries that were damaged to cash in on the high prices. In fact, many were repaired in a remarkably short time. If price were not allowed to rise, profits of undamaged refineries would have been reduced, but the supply of gasoline would have increased at a slower, probably much slower, rate.He also discusses later in the article that he thinks that price controls are also not necessary in developing nations when they face a catastrophe, which is a more controversial stance. Any thoughts on that after reading his argument? Any cases that we did not discuss in class where you think price controls are valid?
(Source: Greg Mankiw's Blog)