Gasoline Prices Shoot for the Stars, but Drift Down Gently

The "rocket and feathers" phenomenon can be hard to explain to consumers.

August 03, 2012

WASHINGTON - What goes up, must come down €" only with gasoline prices, it€™s often a 0-to-60 rise and a snail€™s pace on the decline, USA Today reports. The "rocket and feathers" phenomenon has been going on for a long time, analysts say.

For example, a 2010 Federal Trade Commission (FTC) study found that pump prices jumped four times quicker than they dropped after wholesale cost movement. Some areas, retailers sell below cost when wholesale prices are in the stratosphere, and then attempt to recoup some of that loss when wholesale prices dip, said Matthew Chesnes, the FTC economist who did the study.

Convenience stores make money from in-store sales, and gasoline prices draw in traffic, said Jay Ricker, who owns around 50 stations in Indiana. "People will go somewhere else to buy their gas if your price is significantly higher," added Jeff Lenard, NACS spokesman. "And to some people, a penny is significantly higher."

Research indicates that when pump prices are up, motorists look for the best deal. But when prices start to drop, drivers don€™t pay as close attention, which allows retailers to drop prices slowly. Sen. Bernie Sanders (I-VT) has asked the federal government to investigate unusually high gasoline prices around Burlington, Vermont.

Meanwhile, gasoline prices are soaring again, with the national average for a gallon of unleaded gasoline going for $3.50 on Tuesday €" 17 cents higher than the end of June. Prior to that, the national average had plummeted 61 cents from $3.94 a gallon on April 5 to $3.33 on July 2.

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