I'll take a stab at it.

The "price of oil" is not for oil now - it's for delivery at a set future date. That oil then needs to be refined, transported, distributed, and sold as gasoline. In terms of immediacy to price impacts, the order should be pipeline - refinery - drill site. The price of a barrel of oil on the market shouldn't send gas up immediately.

Basically, gas stations price based on what they anticipate their replacement cost to be on the gas they sell. When oil is on a steady downward trend, prices go down. When they go up, they tend to go up sooner. i think this is purely a fear-based reaction.

At the end of the day, there's a supply and demand thing going on that's providing the disconnect from oil prices to gas prices. The market will bear gas at $3 a gallon. I doubt you'd see much of a drop in consumption as long as gas stays under $5 a gallon. The only thing that will change is the amount of bitching from people who use gas.

If the market drove the market value of your house up by $100,000 and you bought your house five years ago, would you go ahead and sell it at the old price anyway, just to be fair and then go and buy a replacement house at full market value?

I think you need to get your money back for that class. You still haven't learned anything useful yet.

The fear based reaction for price increases should be met with a similar reaction for price decreases when there is less to fear and the prices should adjust immediately and accordingly, don't you think?

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**All of these words finding themselves together were greatly astonished and delighted for assuredly, they had never met before**

What did you do with that money?

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**All of these words finding themselves together were greatly astonished and delighted for assuredly, they had never met before**

Are you suggesting that a day-over-day decrease in the spot price of crude should alleviate any fear that prices will remain high in the future?

I think that the "spot price up => pump price up" relationship is based on the retailer's fear that his replacement cost will be higher. I doubt that a down day soothes him much, especially when the drop in price is "toward $73 a barrel." The current price climate gives very little reason to feel optimism about lowering per-gallon pricing for comsumers or retailers.

First of all, it is bad manners to answer a question with a question. Secondly, your question does not answer my question. Please get back to the topic and try again.

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**All of these words finding themselves together were greatly astonished and delighted for assuredly, they had never met before**

I am suggesting that when prices go up on bad news they should go down on good news in the same amount of time.

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**All of these words finding themselves together were greatly astonished and delighted for assuredly, they had never met before**

And I'm basing my answer on the abundant evidence that shows that people value good and bad news differently. There are numerous studies that show that people are not rational actors when it comes to financial gain versus loss. They tend to undervalue good news/returns and overvalue bad news/returns.

Surely you knew that, though. Example:
You are presented with a game. I will flip a fair coin. If you lose the toss, you must pay me $100. How much do you require if you win in order for you to agree to play the game?

Rationally, the answer is "at least $100." At $100, your expected return is zero. Most players, however, require a lot more than $100 as their return on a win in order to agree to the game. The same thing happens, psychologically, with gas prices. "Good" and "bad" price movements are not valued equally when the range of the movement is equal.

It is actually the same as your question, just restated in terms you might be able to relate to better.

Take a whack at it.

To answer your question, yes, if the price of crude went up today, I would expect the price of gas at the local station to go up correspondingly overnight. The market would probably allow this price change.

If the price went down, I would expect the price of gasoline to fall, though it might take a few days as the local owner tried to maintain the old price until competition quickly made that impossible.

Check out a few articles on asymetric and "sticky" pricing. You'll learn a lot since you seem interested in the topic.

http://the-idea-shop.com/...ckly-but-fall-slowly

http://www.flonnet.com/...0050729004702600.htm

http://www.eia.doe.gov/...pdf/price_change.pdf

http://econwpa.wustl.edu/...ers/0406/0406001.pdf

That should keep you busy for a while. Let me know if you need more information and I'll see what I can do for you.