POSTED: Wednesday, April 13, 2011 - 4:31pm
UPDATED: Thursday, April 14, 2011 - 8:42am
The price of oil is down slightly today, but have you noticed any gas prices dropping?
Every time we go through one of these price hikes, that seems to be the case.
Is it just human nature to think we’re being played on gas prices, or do they really go up faster than they go down…no matter what the price of oil is?
One ketk viewer asked us to look into it, and the answer is…well…mixed.
On the one hand, yes you are being shafted…just a bit.
On this graph, the upper line is the price of oil. The lower is the price of gas. They do rise together, but when oil declines, gas just keeps on rising.
That much is not your imagination.
Economist Dr. Mathew Lewis of Ohio State says, it is also psychology. When prices are rising, you start shopping. But when everything’s expensive, we stop looking.
“When prices start to go up, consumers may see the high price and start searching around to get the lower price they think is still available even after it’s not,” Lewis says. ”Whereas on the way down, you may see a low price simply because prices have fallen, and you think it’s a good prices compared to what you paid last week. And you don’t go searching for a better deal.”
Jeff Lenard of the National Association of Convenience stores insists there is no lag time. it’s all in your mind.
“When gas prices are going up, people will be leaning out of their windows with binoculars waiting to see if that shipment comes in, watching to see what people will do with gas prices and their signs,” he says. “When prices are falling, a lot of that tension goes away.”
But again, how do we explain the clear price trends? Isn’t there at least a little bit of reluctance to bring it down as fast as it went up?
“And on the way down, they try to make that up,” Lenard says. “So if the shipment …on the way down is less, they’ll try to hold onto that.”
There is a name for this economic theory, by the way.
It's called asymmetric price adjustment.
The slang term for it is...rockets and feathers.