Originally Posted by TromboneAl
Has anyone done a plot of price of a barrel of oil vs. average price at the pump? One's impression is that the pump price tracks the oil price on the way up, but lags on the way down. I wonder if that's true.
I haven't done a scientifically scientific study. But for a few months I would watch the daily spot price of regular unleaded gas and try to predict changes in the price of gas. It seemed like sharp increases would cause a spike at the pump in a day or two. Sharp decreases usually took 5-7 days to gradually ease down to where they should be.
Part of it might be the supply chain. From refinery to pipeline to regional storage tanks to distributor(s) to gas stations (at least in this part of the country). Each party is quick to pass on the increase in cost to those below them in the supply chain. When the price drops, it may take each party a little longer to pass on the reduction.
The retail gas station also has the problem of buying in bulk at what may be spot prices. Say on Monday they fill up their 10000 gal underground storage tank with gas that might retail at $2.70. The spot price jumps $0.10, and they can then sell that gas for $2.80 and make more money. If the opposite occurs, and the price drops $0.10, then they would be losing money if they sold the gas at $2.60. They aren't going to lose money (neither are surrounding gas stations), so the price stays relatively high until they sell off the "expensive" gas.
Or maybe I'm just rationalizing the gas stations sticking it to me. Although I think their net margin on a gallon of gas is a few cents usually.