Robert Romano writes for the Daily Torch about the impact of falling oil prices on gas prices.
“The big Oil Companies are not dropping their price at the pump commensurate with the sharply lower prices they are paying for Oil. Those prices are dropping like a rock! In other words, customers are being ‘gouged.’ I have instructed the DOJ to immediately start looking into this. Gasoline prices better start going down a lot faster than what I’m seeing!”
That was President Donald Trump on June 24 in a post on Truth Social, stating he had ordered the Justice Department to investigate alleged price gouging at the gas pump, noting oil prices are falling faster than gasoline. The implication is there might be illegal price collusion. …
… In 2014, the St. Louis Federal Reserve’s Michael T. Owyang and E. Katarina Vermann highlighted this phenomenon in an article, “Rockets and Feathers: Why Don’t Gasoline Prices Always Move in Sync with Oil Prices?” noting the oil and gasoline price movements are often asymmetrical.
It stated, “Both casual and industry observers say that gas prices adjust to changes in oil prices faster when gasoline prices are relatively low compared with oil than when gasoline prices are relatively high compared with oil. This uneven pass-through can be seen when oil prices rise after being steady for some time — gasoline prices shoot up quickly. In contrast, when oil prices fall after being steady for some time, gasoline prices retreat slowly. In the gasoline industry, this phenomenon is known as ‘rockets and feathers.’” …
… [T]here could be something to President Trump’s claims, but if so, it might be down to the individual gas station level, as seller market power appears to vary based on how close gas stations are to one another. As Owyang and Vermann noted, “One factor that influences market power is market concentration: Gas stations that are physically close together have less market power than do gas stations that are farther apart.”
