The people's economist, Walter Williams, patiently explains once again why limits on "price gouging" are counterproductive (I noted Georgia's "crackdown" on price gouging a week or two ago):

The fallout from Hurricane Katrina has featured a lot of ignorance and demagoguery about prices. Let's look at some of it. One undeniable fact is that the hurricane disaster changed scarcity conditions. There are fewer stores, fewer units of housing, less gasoline and a shortage of many other goods and services used daily. Rising prices not only manifest these changed scarcity conditions, they help us cope, adjust and get us on the road to recovery.

Here's a which-is-better question for you. Suppose a hotel room rented for $79 a night prior to Hurricane Katrina's devastation. Based on that price, an evacuating family of four might rent two adjoining rooms. When they arrive at the hotel, they find the rooms rent for $200; they decide to make do with one room. In my book, that's wonderful. The family voluntarily opted to make a room available for another family who had to evacuate or whose home was destroyed. Demagogues will call this price-gouging, but I ask you, which is preferable: a room available at $200 or a room unavailable at $79? Rising prices get people to voluntarily economize on goods and services rendered scarcer by the disaster.

He also explains why the cost that the service stations paid when the bought the gasoline is simply irrelevant:

What about the house you might have bought for $50,000 in 1970 that you're selling today? If you charged me $250,000 for it, today's price for its replacement, as opposed to what you paid for it, are you guilty of price-gouging?