Biden demands faster drop in gas prices as oil tumbles

‘It just seems to take a long time’

This is nothing new. The industry even has a nickname for this practice: Rockets and feathers.

“This has been going on for 40 years,” Andy Lipow, president of consulting firm Lipow Oil Associates, told CNN. “Prices do dip, it just seems to take a long time. You can’t deny the data that is out there.”

Old or new, Biden isn’t a fan, especially after observing this phenomenon last fall when gas prices retreated slowly after the administration released emergency oil reserves and Omicron hit.

“Try explaining how it’s just rockets and feathers to President Biden, and you’d better be ready to hear, ‘That’s a bunch of malarkey’ coming back at you,” a senior White House official told CNN. “The president is very much within his rights to point out that if you’re going to have rockets on the way up, you need to have rockets on the way down, not feathers.”

But it may be unreasonable to say pump prices should change instantly just because oil prices do. It takes time for price swings to filter through the supply chain.

A gas station owner may be selling fuel today that was purchased days earlier when oil prices were much higher. (That’s especially true in today’s extremely volatile market.)

“Don’t get me wrong. There would be some lag,” Lipow said. “What if I was the guy who just bought my tanker load yesterday and the next two days crude oil dropped?”

Tom Kloza, global head of energy analysis at the Oil Price Information Service, said gas stations have little choice but to pass along the impact of higher oil prices on the way up because of the pressure on their profit margins.

“And on the way down, It’s like, ‘We’ll be as patient as we can,'” Kloza said. “They will fall, but at a much slower pace.”

Joe Brusuelas, chief economist at consulting firm RSM, noted that gasoline prices are a function of past purchases and expectations around the cost of future deliveries — and there is vast uncertainty right now about the direction of oil prices.

“Criticism of price setting at gasoline stations is somewhat misguided,” Bruseulas said.

$1,300 hit to households

There are real economic consequences here.

Every 10-cent increase in the price of gasoline costs consumers at least $11 billion over the course of a year, according to Moody’s Analytics.

Gas prices have surged over the past year and a half, and at the end of last week, they stood about $1.50 a gallon higher than the 2019 average. If prices stay this…