Gasoline Price Inelasticity

Been watching gasoline outperform crude for months, looks like somebody else has noticed:

WASHINGTON, May 6 (Reuters) – U.S. Attorney General Eric Holder on Friday directed a special task force to look into whether gasoline prices are falling in the wake of the drop in oil prices and if not, whether it was because of fraud or market manipulation. “If wholesale prices continue to decrease, fraud or manipulation must not be allowed to prevent price decreases from being passed on to consumers at the pump,” Holder said in a memorandum to a special task force working group set up to probe possible fraud and manipulation in the energy markets.

The irony here is the finger pointing at so called ‘speculators,’ when in reality it is the Federal Reserve and its easy money policy which is the primary cause for a dramatic run-up in all commodities. That being said, gasoline has been particularly strong on oil pullbacks, and during rallies it has been taking the lead.

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