Price stickiness on the forecourt

The AA isn’t happy. Standing up for hard pressed motorists is part of its daily remit and their latest salvo is directed at the petrol retailers for failing to pass on reductions in the price of crude oil on world markets to drivers who have been getting used to spending over £75 to fill up their tanks. Oil prices are indeed on the slide - how much further can the declines go? Will speculative activity accelerate the decline towards $110 or lower? But the AA claims that the major petrol retailers have been slower to reduce prices than they were to raise them when the cost of crude was heading northwards. Edmund King is reported in the Telegraph as saying “We calculate that retailers should be cutting a penny a litre off diesel and petrol with each two dollar fall in oil prices. The AA calculates that this should have meant petrol falling from 119.7p to 106.2p a litre and diesel dropping from 133.35p to 119.75p. Instead the latest pump price for petrol is about 115.25p, while motorists are still paying 128.42p for diesel.”

Inevitably there are time lags between changes in crude prices on global markets and the price we pay for petrol. Expect the supermarkets to move things along in the next couple of weeks with another bout of vigorous price competition. Profit margins for retailers of petrol and diesel are actually wafer thin - most of the money is made at earlier stages of the supply chain from oil exploration and refining.

Chart
Petrol_Diesel_Prices.ppt

Unit 2 Macro: Cyclical and Structural Economic Issues Facing the UK [23 May 2012]
Unit 3 Micro: Game Theory and Business Economics [21 May 2012]
Unit 2 Macro: Positive and Negative Multiplier Effects [20 May 2012]
Unit 2 Macro: The Importance of Productivity [20 May 2012]
Unit 2 Macro: Measuring Inflation in the UK [20 May 2012]
Unit 2 Macro: Real Interest Rates [20 May 2012]
Q&A: What do we need to know about output gaps? [20 May 2012]
Unit 2 Macro: The Output Gap [20 May 2012]
Unit 1 Micro: Revision Presentation on the Price Mechanism [16 May 2012]
Unit 1 Micro: Revision on Rice Prices [13 May 2012]
Unit 1 Micro: Price Elasticity of Supply [13 May 2012]
Unit 2 Macro: Revision Notes on Supply-side Policies [10 May 2012]
Unit 1 Micro: Revision Blogs on Markets and Intervention [10 May 2012]
Unit 1 Micro: Revision Quiz and Game on Market Prices [10 May 2012]
Unit 2 Macro: Model answer for revision data question [9 May 2012]
Unit 2 Macro: Monetary Policy and Inflation Glossary [5 May 2012]
Unit 2 Macro: Aggregate Demand Glossary [5 May 2012]
Unit 1 Micro: Climate Change Policies - Finding the Right Mix [30 Apr 2012]
Unit 1 Micro: Using the Cost-Benefit Principle [30 Apr 2012]
Tullow Oil and African Development [25 Apr 2012]
Unit 4 Macro: The Euro Zone Crisis (Revision) [22 Apr 2012]
Unit 3 Micro: Quiz on Business Costs and Profits [11 Apr 2012]
Unit 3 Micro: Evaluation Question on Supermarkets [11 Apr 2012]
Unit 3 Micro: Revision on Contestable Markets [8 Apr 2012]
Unit 3 Micro: Revision on Monopoly Price and Output [6 Apr 2012]
Unit 3 Micro: Monopoly and Economic Welfare [6 Apr 2012]
Unit 3 Micro: Revision on Scale Economies and MES [5 Apr 2012]
Unit 1 Micro: Revision on Price Elasticity of Supply [5 Apr 2012]
Unit 1 Micro: Revision on Elasticity of Demand (for Rice) [3 Apr 2012]
Unit 1 Micro: The Collapsing Price of Carbon [3 Apr 2012]
Unit 1 Micro: Revision on Producer Subsidies [2 Apr 2012]
Unit 2 Macro: Revision on Real Economic Data [2 Apr 2012]
Unit 3 Micro: Post Office Threatens Smaller Photo Businesses [2 Apr 2012]
Unit 2 Macro: Revision on Real Disposable Income [2 Apr 2012]
Unit 3 Micro: Revision on Scale Economies, Technology and Prices [1 Apr 2012]
Unit 1 Micro: Nottingham introduces workplace parking tax [1 Apr 2012]
Unit 1 Micro: Revision on Maximum Rents in Housing [1 Apr 2012]
Unit 1 Micro: Revision on Producer Cartels [31 Mar 2012]
Unit 2 Macro: Revision on Index Numbers [31 Mar 2012]
Unit 2 Macro: Revision on Capital Investment [30 Mar 2012]
Unit 1 Micro: Brazilian coffee buffer stock hit by falling prices [29 Mar 2012]
Unit 3 Micro: EU Imposes Further Price Cap on Mobile Phone Companies [29 Mar 2012]
Life in the Slow Lane - UK Growth in 2011 Lags the Euro Area [28 Mar 2012]
George Buckley at the Millfield Economics Society [28 Mar 2012]
Unit 4 Macro: Evaluating 3 Years of Quantitative Easing [27 Mar 2012]
Unit 1 Micro: The Tax on Beer [16 Mar 2012]
Unit 1 Micro: Inequality - The Rise of Fuel Poverty [15 Mar 2012]
Unit 1 Micro: 50 years of anti-smoking campaigns and awareness [6 Mar 2012]
Unit 1 Micro: Breaking Down the Cost of Gas [4 Mar 2012]
Unit 2 Macro: Might Oil Prices Bring another Recession? [4 Mar 2012]
Unit 3 Micro: Low Pay in Supermarkets [24 Feb 2012]
Unit 4 Macro: King on the UK Economy [15 Feb 2012]
Unit 1 Micro: Public Goods [11 Feb 2012]
Unit 2 Macro: Focus on China - Inflation [26 Jan 2012]
Unit 1 Micro: Can the UK Computer Games Industry Grow [24 Jan 2012]
Unit1 Micro: Processed Meat and Cancer Risk - Information Failure? [17 Jan 2012]
Unit 2 Macro: Look Upwards to Find the next Downturn [15 Jan 2012]
Unit 2 Macro: Factors Driving Business Investment [10 Jan 2012]
Unit 4 Macro: Natural Disasters and their Economic Impact [7 Jan 2012]
Unit 1 Micro: Low Cost Airlines Beat the Recession [1 Jan 2012]
Unit 1 Micro: Biomass Subsidies and Timber Prices [30 Dec 2011]
2012 - Carnage on the High Street [28 Dec 2011]
Unit 2 Macro: The UK Housing Market in 2011 [26 Dec 2011]
Unit 3 Micro: Sub Normal Profits - BP Leaves the Solar Industry [21 Dec 2011]
Unit 3 Micro: Oligopoly and Duopoly in Bus Markets [20 Dec 2011]
Unit 3 Micro: Patent Wars- A Touchy Subject for Apple [16 Dec 2011]
Don’t you just love it when Panorama does your lesson for you!- Part 2 [6 Dec 2011]
Unit 3 Micro: Tacit Collusion in the Supermarket [27 Nov 2011]
Unit 3 Micro: Brand Loyalty in Mobile Phones [27 Nov 2011]
Unit 1 Micro: 50 Years since the end of the Max Wage in Football [23 Nov 2011]
Pasty Prices - Something to Chew Over [19 Nov 2011]
Unit 2 Macro: Should the EU introduce a Tobin Tax? [14 Nov 2011]
AS Macro: The State of British Business [13 Nov 2011]
Unit 3 Micro: Unilever hit by rising costs [6 Nov 2011]
Unit 3 Micro: Examples of Price Discrimination in Action [31 Oct 2011]
Unit 3 Micro: UK Executive Pay - All in it Together? [29 Oct 2011]
Unit 1 Micro: Economists attack food price speculation [24 Oct 2011]
Unit 3 Micro: Ofcom gives stamp of approval for flexible pricing in mail [21 Oct 2011]
Unit 4 Macro: World Food Day [16 Oct 2011]
Unit 3 Micro: Contestable Markets - Lucozade takes on Coca Cola [10 Oct 2011]
Unit 1 Micro: Producing Coffee - Kenya in Pictures [4 Oct 2011]
Unit 1 Micro: Homework Assignment on Market Prices [2 Oct 2011]
Unit 1 Micro: Exercise on Equilibrium Market Prices [27 Sep 2011]
Unit 1 Micro: Exercise on Market Supply [26 Sep 2011]
Unit 4 Macro: IMF Flags up Risks of Double Dip [20 Sep 2011]
Another Economics prop - for remembering MC=MR! [15 Sep 2011]
Unit 2 Macro: Economic Growth and Inequality [14 Sep 2011]
Study Note - What is Macroeconomics? [13 Sep 2011]
Starter Activity: Health Economics [1 Sep 2011]
Monetary Policy Roundtable [25 Jul 2011]
Unit 1 Micro: Cotton Prices and the Retail Price of Clothing [13 Jul 2011]
Unit 1 Micro: Economics of Volatile Corn Prices [12 Jul 2011]
Zondle Game: 10 Question Quiz about OPEC [11 Jul 2011]
Unit 4 Macro: Dangers of High Inflation [11 Jul 2011]
Unit 3 Micro: Oligopsony - Dairy Losses Drive Farmers from the Fields [10 Jul 2011]
Unit 1 Micro: FirstBuy, Affordability and Effective Demand in Property [10 Jul 2011]
Unit 1 Micro: High price of petrol drains demand [9 Jul 2011]
Where there’s muck there’s brass [6 Jul 2011]
AS Micro: Fears over a century of hunger [22 Jun 2011]
AQA ECON4 Context [20 Jun 2011]

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