Why are gas prices quick to rise, but slow to fall?

Finally, some good news about oil prices: they are down sharply. But are you suddenly finding a tank of gas is becoming cheap? Didn't think so.

So we went out to find out why gas prices are so quick to rise, but so slow to fall.

Up 20 Cents in One day, But Down 2 Cents

Has the oil bubble burst? Osama bin Laden's death coupled with weak employment numbers sent crude down 10% in a week.

But drivers we spoke with told us they're not seeing a huge change at the gas pump yet. One said "it still seems pretty high to me!"

Many wonder why gas prices can jump 20 cents in one day when oil surges, but they never drop 20 cents at once.

Paul Wethington of Norwood said "every time gas jumps up, they might lower it a penny at a time or two pennies at a time, and then it takes forever to get back down to where it was."

Swifty Gas station manager Mark Hans says gas prices are falling, saying "I've come down 12 cents the past 4 days."

But why can't he just take another 20 cents off the sign, to match the recent drop in crude oil?  He told me  "I gotta go by what the company tells me to do. If I was the owner it would be a different story."

So why are oil companies slow to react to an oil price drop?

Reason for the Slow Drop

A recent MSNBC report calls this "downward price rigidity," and says it happens at the grocery store too.

Economists quoted in the report say companies can't afford to be left behind when raw prices are rising, whether on gas or vegetables.

But they say when wholesale prices fall, retailers want to squeeze out every last penny of profit before lowering their prices.

Hence, "downward price rigidity," or in English, why gas prices fall much more slowly than they go up.

Hold Off a Few Days

Your best bet, if you hear about a big drop in oil prices in the news, is to hold off a couple of days before your next fillup.

That way the new oil price has time to trickle down to the local gas pump. And I do mean trickle, unfortunately.

So don't waste your money.

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