[Red in Blue PA]

Give me a break. Everyone here has seen gas prices shoot up 20-30 cents INSTANTLY when oil jumps $10/barrel. But when it falls just as quickly, gas prices seem to stay there.

Defend this if you will, but there is something wrong.

[Bishop_Malachi]

Give me a break. Everyone here has seen gas prices shoot up 20-30 cents INSTANTLY when oil jumps $10/barrel. But when it falls just as quickly, gas prices seem to stay there.

Defend this if you will, but there is something wrong.

___________________________________________________________

You are noticing a very common effect in business. There is a tendency to set prices high and then lower them down to the profit-maximizing point of equilibrium. If you have noticed, gas prices have been steadily dropping since summer. There may be a recent hiccup due to events related to the Baku-Tbilisi-Ceyhan oil pipeline, but the trend has been down since the summer break/vacation period is over.

If it makes you feel any better those evil oil companies only maximize their profit at equilibrium, so if they are really pricing gas too high, then it will continue to fall until they maximize profits (which after all is a function of price AND units sold....not simply price).

[arthurus]

When oil goes up the station owners know that the price of the next shipment will be up. When it goes down the station owners do not know that that is not a 1 day aberration. They get hurt bad if they guess wrong on an actually rising price, not so bad if they guess wrong on a declining price. They lose either way. If they guess wrong about a declining price they lose customers to a station that guessed better.

Observing the price of gas hereabouts I have noticed that it does, indeed go up when oil goes up unexpectedly and there is some reason divined for that, like Katrina. On the other hand gasoline has been declining steadily here, even when oil bounces up. Tracking the prices day by day it would be hard to make any sort of close relationship. There are store/stations that sell pretty much at cost or even a tad below cost because gasoline is what brings people into their stores. Those stations limit the amount that other stations can raise their prices. A friend's store makes essentially nothing on the gasoline it sells after subtracting the drive-offs but it brings people into his store to pay his inflated prices on convenience store stuff. He won't go to pre-pay because he thinks it will reduce his customer base. There are also stations that charge 10-20 cents higher prices than the norm and I see their lots empty whenever I drive past. I sometimes wonder just what business those fellows are actually in.