The Hidden Pattern in Gas Prices (And How to Beat It)

You may know this feeling: Oil prices tick up, and the six-foot price at your local gas station changes before you can blink. But when the price of oil starts to fall, the relief seems to arrive in slow motion.

It’s not your imagination. Economists have documented this pattern for decades. Gas prices have a habit of rising like rockets, while falling like feathers.

And this phenomenon is making news right now.

Oil prices have been bouncing around since the start of the Iran war, but now that prices have started to decline following the (on-again, off-again) ceasefire, Donald Trump has jumped on social media to accuse oil companies of not cutting gasoline prices fast enough.

He even called it price gouging:

Price gouging is a serious charge. So before we press charges, let’s attempt to better understand what’s actually going on here.

The asymmetric pattern of “rockets and feathers” doesn’t necessarily prove wrongdoing on the part of oil companies or gas stations. Instead, it can emerge from several different mechanisms—some innocent and others more troubling. But either way, understanding this pattern (and its causes) can help you make smarter decisions for your own wallet.

Gas prices jump, then drift

Let’s start with the actual claim: It’s not that gas prices never fall. Of course they do. Instead, it’s a claim about the speed at which they do.

Which means this isn’t necessarily a question about good blokes versus bad blokes, but one of timing: Does bad news travel through the system faster than good news?

This is a hypothesis we can test.

What the data show

To do so, I fetched weekly oil and gas prices as far back as the data (easily) allowed.

The gas prices come from the U.S. Energy Information Administration (or EIA), and reflect the retail price surveyed at the pump first thing every Monday. The weekly oil prices reflect the closing price of West Texas Intermediate crude oil from the previous Friday.

I compared each of these Monday pump prices to the previous Friday’s crude…