Bob Tippee
Nobody likes the word "shortage."
A connotation of panic shrouds the term. The fear seems strong that utterance of "shortage" among a group of consumers might lead to a run on available supply, hoarding, and soaring prices.
Scarce is the politician, for example, who will describe current conditions in the oil and gas markets as shortage. It's easier to explain away elevated prices as a "war premium."
Economists don't think shortage exists in nature. The market always balances at some price. Supply always equals demand. Nobody willing to pay the market price ever goes without supply.
That's the theory, anyway. Logistical problems sometimes put an inconvenient distance between the willing buyer and the desired supply for a while. They call that spot shortage.
And hyperactive governments sometimes create true supply voids with price and consumption controls. But those never last. Over time, market forces are irresistible.
The economists are right, of course. Markets won't tolerate shortages other than the spot, logistically imposed kind.
When demand rises relative to supply, the price rises to extinguish enough demand to keep things in balance. Supply usually rises, too, with the same happy result.
The reverse happens when supply rises relative to demand. Then the price falls, stimulating consumption and shooing unwanted supply out of the market.
In the classic sense of the term, then, shortage never exists unless imposed by governments.
So what good is the term? Why have a word to describe a condition that never exists?
Now is a good time to raise the question. The market is as strained now as it has been in some time.
Inventories are low, demand relatively strong. Prices are high. Spare production capacity is vanishing.
The market's main constraint through most of the Northern Hemisphere winter has been supply.
It's not shortage in the classic economic sense. Willing buyers still find supply, bidding it away from the less-willing.
But it's as much of a shortage as the market ever experiences.
And if people are buying in a panic for storage, their behavior isn't showing up in the inventory numbers.
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