Why when oil drops the price at the pumps doesn't immediately drop, but it's reverse when oil goes up?

Question

You've see the price of oil drop nearly $15, but the price of the pump as not even moved an inch. However, when the price of oil was skyrocketing the gas companies were changing the price at the pumps up to 5 times a day. Can someone help me explain this?

Answer 1

I usually see about a 3 day delay with news / events and the price of gas changing... Also certain days of the week, like Thursdays, seem to have higher prices than others...

Answer 2

When the "speculative" cost of a barrel of oil goes up, it reflects what the cost of the gas will be the next time a wholesaler or retailer makes a purchase. Hence the cost at the pump goes up immediately. As a business man why would you sell your product at a lower price than your next purchase price (or a far lower margin)?

When the price of a bbl of oil goes down, it has no effect on the cost of the gas already in the retailers or wholesalers tanks. So the price will not go down immediately. They still need to make a profit on what they've already purchased.

Answer 3

The oil companies are trying to make as much money as they can make off you. How else do you explain the billions of dollars in profits.  They also try to "explain" the drop in prices by saying we have to use up the stuff that we paid the higher price for then we will drop reatail prices. Not true but that is what they claim

Answer 4

Oil has gone up much more then gas, but anyways price formation doesn't have much to do with costs, but more with what people are willing to pay, only if someone through competition can take market share from others by lowering prices and earning more themselves will any price go down.

Answer 5

It's called gouging the customer

Answer 6

So that the gas station can make more money.

Answer 7

because they can do what the won't to do and their is nothing we can do about it.