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[a673teamster]

Posted Sep 3rd 2008 2:35PM by Melly Alazraki

We can all sense it even without looking at the numbers -- gas prices rose very quickly when oil prices had their huge run-up, but since oil prices started falling, gas prices didn't match the declines. Indeed, since oil reached its record price of $147.27 a barrel on July 11, it dropped over 26% to around $107-108 today. Gas prices peaked at $4.14 a gallon on July 17, but have fallen only 10% since. Comparing weekly data from the EIA shows a similar, if less extreme, picture. Why is that?

Economists differ in their views of why this asymmetric pricing happens. In the case of gasoline, it seems to be the "fault" of the consumer. Since information about oil prices is readily available, consumers know what to expect even before they go to the pump, therefore behaving differently during times of rising and falling oil prices. This, in turn, limits or allows for larger gasoline price changes.

During times of rising oil prices, consumers are very price conscious and shop for deals. Sure, since gas stations take delivery often, they'd be eager to pass on the price increases to consumers immediately. But as most consumers comaprison shop, gasoline retailers are limited by the amount they can hike up prices.

When oil prices go down, however, consumers are less alert to prices and compare much less as long as they see even a small price reduction. This allows gasoline retailers to lower prices at a slower pace as they recover some of the profit margins lost on the way up. No wonder so many oil companies have been exiting their retail operations lately.

Conclusion: If you want to pay near $3 a gallon again, always shop around!

http://www.bloggingstocks.com/2008/09/03/w...onsumers-fault/