In recent months, U.S. gasoline prices have risen significantly—because of both increased demand and increased production costs. Notably, but not surprisingly, oil prices have also increased. And although oil is a key input in the production of retail gasoline, oil and gas prices don’t always move in tandem.
When oil prices shoot upward, gas prices rise with them. And when oil prices fall, gasoline prices also fall; but they can fall at a slower rate. Economists refer to this market dynamic as “asymmetric pass-through.” A more colorful description of the phenomenon is “rockets and feathers.”
Our FRED graph plots the average U.S. price for a gallon of gas (left axis, blue line) and the average U.S. price of a barrel of oil (right axis, red line). The two lines largely move together, as we’d expect. When oil prices have increased, gas prices have immediately risen to meet them. That’s the rocket effect. When oil prices have decreased, though, the corresponding decrease in gas prices has often come after a short delay. That’s the feather effect.
While this phenomenon doesn’t occur every time oil prices fall, it can be seen in recent months: at the beginning of December 2021 and at the end of March 2022. To see this, zoom in on the graph either by moving the date sliders just below the graph or by selecting a shorter, more-specific time span in date picker at the top right of the graph.
You can find more analysis that describes retailer market power and consumer search costs as possible drivers of this asymmetry. Research also finds that the degree of this asymmetric pass-through varies by geographic region.
How this graph was created: Search FRED for and select the “US Regular All Formulations Gas Price” series. (Series ID: GASREGW.) From the “Edit Graph” panel (at the top right corner of the graph), use the “Add Line” tab (second from the left) to search for and select “Crude Oil Prices: West Texas Intermediate (WTI) – Cushing, Oklahoma” (Series ID: WCOILWTICO) by clicking the “Add data series” button under the search bar. Under the “Format” tab, go to the “Line 2: Crude Oil Prices: West Texas Intermediate (WTI) – Cushing, Oklahoma” section and change the Y-axis position from left to right. Close the graph editor window using the “X” at the top right. Adjust the graph to the desired dates using the slider at the bottom or the date entry boxes at the top right.