Questions about oil and gas prices

[happyslug]

2. It is a product of what economicist call "Price stickinest".

People do NOT like taking a loss on any thing, thus as prices goes up, they price previously purchased items as if their cost was the cost of new inventory. As prices fall, sellers keep prices up to cover what they paid for,. In the oil industry it takes only four weeks for the price at the well head to hit the local gas pumps, but eight weeks in the reverse direction. I notice this first in the 1998 price drop, but others saw it well before that. not only in oil but any good that is constantly being replaced (Coal, Food etc).

This phenomenal is know a "Price stickinest" for more see:
http://en.wikipedia.org/wiki/Sticky_%28economics%29
http://www.econlib.org/library/Enc/NewKeynesianEconomics.html
http://mba.tuck.dartmouth.edu/paradigm/spring2000/articles/wylie-prices.html

Here is a 46 page paper on the concept:
http://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1375.pdf

Here is a 39 page paper on the same subject, this time based on a study of gasoline prices:
http://dss.ucsd.edu/~jhamilto/davis.pdf