Business
Commentary: Blame gas stations — and yourself — for the rise and fall of gas prices
Here’s the name for an economic phenomenon that consumers are going to be hearing a lot more in the coming weeks and months:
It’s the rocket-and-feathers hypothesis, which concerns why gasoline prices rise so quickly (i.e., like a rocket) when oil prices surge and drift downward oh so slowly (like feathers) when crude prices come back to earth.
The pattern is certain to become ever more obvious as oil prices continue to oscillate in response to President Trump’s Iran war and the effect of constrictions in the volume of crude moving through the Strait of Hormuz.
The evidence … supports the common belief that retail gasoline prices respond more quickly to increases in crude oil prices than to decreases.
— Borenstein et al (1997)
The price of crude oil, which had settled at about $60 a barrel before Trump ratcheted up his anti-Iran rhetoric in February, has reached as high as about $113 after the conflict began, but fell below $96 during the day Wednesday as talk emerged of a possible peace deal.
Meanwhile, the average price of gasoline has soared relentlessly, reaching a nationwide average Wednesday of about $4.54 per gallon of regular, according to AAA. That’s up 12 cents from a month ago and higher by $1.38 from a year ago. So the pace at which pump prices return to those halcyon days before Trump’s saber-rattling is certain to be top of mind for consumers nationwide — and globally — if and when tensions ebb in the strait.
The economics of gasoline play a unique role for most households. That’s largely because gasoline demand is relatively inelastic, in economic parlance: It’s hard for many people to reduce their consumption when prices rise, because they still have to commute to their workplace and perform the same daily chores that require auto travel.
They can move down to a lower grade of fuel, but their options to do so are limited compared with the choices they can make at, say, the supermarket, where they can respond to a surge in the price of beef by choosing a cheaper cut or a cheaper protein.
That makes it useful to understand what drives gasoline prices higher or lower. Let’s take a look.
The academic bookshelf groans with the weight of studies of the phenomenon, but the seminal analysis of the topic remains a 1997 paper by economist Severin Borenstein of UC Berkeley and his colleagues.
They looked at how crude oil prices affected profit margins at several points in the crude-to-pump voyage of oil to gas, including crude supplies to the wholesale market and wholesale to retail. They found signs of rocket-and-feather price changes at all points, but for the layperson their general conclusion was this: It’s not your imagination.
“The evidence … supports the common belief that retail gasoline prices respond more quickly to increases in crude oil prices than to decreases,” Borenstein and his colleagues wrote in 1997.
The phenomenon is still “alive and well,” Borenstein told me Wednesday, adding that “much of this is a retail pricing phenomenon,” meaning that much of the explanation can be found at your corner gas station.
It can also be found in consumer behavior. Specifically, the inclination of consumers to search for lower prices during a spike. When prices are going up, consumers may see a high price at a particular gas station and think it’s an outlier, so they look for alternatives — even if all stations are raising prices. “They think they’ve found a bad deal, when in reality all prices are high,” says economist Matthew S. Lewis of Clemson University, who studies consumer search behavior.
When prices are falling, Lewis told me, consumers lose their incentive to search because they find prices that are similar to what they’ve expected. “Once everyone’s lowered their prices a little bit, that takes away their incentive to lower them further because no one is looking around for lower prices” and further reductions won’t win gas stations any new customers. “Everyone’s happy at the first station they stop at,” Lewis says.
Retailer profit margins are chronically slim — and during rapid crude price increases even negative — giving them an incentive to raise prices quickly as the cost of crude and of refined gas mounts — and to try to hold the higher prices steady to recover their margins as their other costs call.
It’s also true that consumers become more sensitive to higher prices because press coverage makes the price hikes inescapable, and less so as prices fall, even if they don’t fully return to earlier levels. Just now, as it happens, the price of gasoline receives front-page coverage and is flashed almost minute by minute on cable news shows.
Lewis points out, however, that “there’s a strong asymmetric pattern in press coverage too. As prices are going up, that’s talked about a lot, and as prices start to fall the coverage goes down and down, and people’s attention does too.”
That brings us to the factors affecting the price of gasoline. The cost of crude oil is known as the spot price — the price quoted by traders on the open market. By the time the oil reaches consumers as gasoline at the pump, it has changed hands several times — at refineries, regional terminals and local distributors.
The analysis by Borenstein and his colleagues found most of those markets to be reasonably competitive — that is, their prices adjusted quickly to changes in crude prices. But asymmetry — prices rising fast but falling slowly — increased as the refined product made its way to city distribution terminals and subsequently to retail stations. It’s the latter that have the most incentive to raise prices quickly and to stick with them the longest.
“Asymmetry in price adjustment is a retail thing,” Lewis says, “which is what you’d expect if the source is consumer search rather than collusion.”
It can be difficult to pinpoint the factors reflected in retail gas prices because they differ among regions. After Hurricanes Katrina and Rita laid waste to drilling, transport and refining facilities around the Gulf of Mexico coast in 2005, gas prices soared in the South, Midwest and along the East Coast, which depended heavily on crude and refined gas produced in or near the gulf. That resulted in gas prices jumping by nearly 60 cents per gallon, according to research by Lewis.
But the pace at which the increases ebbed differed within that market, in part because its retail structures differed among states and cities. In those with high concentrations of independent gas stations — those unaffiliated with branded refineries — prices fell relatively faster.
The reason, Lewis found, was that those communities experienced “cyclical pricing,” in which gas station owners had a habit of changing their prices frequently as a competitive device, often moving the price of gas day by day. Strategic pricing tended to make high prices relatively less sticky.
California is another unique market. The state’s limited refinery capacity makes it more vulnerable to crude price shocks, and its mandate for anti-smog gas formulations in the summer also constrains gas supplies, pushing prices higher. California’s gas taxes are higher than the national average, contributing to its nation-leading prices at the pump.
Then there’s what Borenstein has identified as the state’s “mystery gasoline surcharge,” an unexplained differential in price that originated after a 2015 fire at a Torrance refinery then owned by Exxon Mobil, but persists without explanation more than a decade later and is currently estimated at more than 50 cents per gallon.
What’s indisputable is that consumers are paying for the Iran war at the pump, and they’ll continue to do so for weeks, even months, after the conflict is resolved and the Strait of Hormuz is opened again to all traffic. Economists observe, furthermore, that large price spikes at the pump take longer to return to equilibrium than small ones, in part because retailers can keep prices high until they see evidence that they’re losing customers.
In other words, it’s reasonable to feel relief once crude oil prices retrace their journey back to where they were before the Iran war began. Just don’t expect to feel relief at the pump any time soon.
Ford Motor Co. is suing a prominent Los Angeles lemon law firm for allegedly inflating their fees by as much as 7,000%, the company’s latest attempt to crack down on California attorneys who it says are exploiting the state’s unique law to protect consumers from defective cars.
Quill & Arrow, a personal injury firm that represents drivers suing over so-called “lemons” — vehicles with significant, unfixable manufacturing flaws — has long been a thorn in the side of Ford. Since 2021, Ford said its has paid them more than $100 million, roughly half in attorney fees.
That profit, Ford alleges in a federal lawsuit filed Thursday, came from billing records that were “utter fabrications.”
Quill & Arrow used an overseas “army” of low-paid, non-lawyers to help file thousands of lemon lawsuits and then pretended the work was done by California attorneys, who billed as much as $950 per hour, Ford alleged in its complaint.
Ford claims that the bulk of the work was actually done by non-lawyers in countries such as Mexico and the Philippines, who got paid as little as $13 per hour.
Quill & Arrow was founded in 2019 by attorneys Kevin Jacobson and Jonathan Shirian, according to the firm’s website, which touts recovering $500 million in lemon law payouts. The partners called Ford’s lawsuit “nothing more than an attempt to silence firms who would dare to hold them responsible and seek justice for consumers.”
“It grossly mischaracterizes the facts and the claim that Quill & Arrow created fabricated attorney billing records is absurd,” the firm said in a statement.
California’s lemon law, considered one of the strongest consumer protections in the nation, allows drivers to get a refund or replacement of a broken car if the manufacturer can’t fix it. If the driver is not satisfied, they can sue.
If the driver wins, the law allows attorneys to collect their fees from the car maker — rather than take a percentage of the client’s winnings, as is common in personal injury cases. This fee structure, Ford argues, has turned the law into a bonanza for plaintiff attorneys. The longer the case drags on, the company argues, the more the law firm can reap in profit.
Ford alleges the firm intentionally slowed down its clients’ cases to drive up their billable hours, instructing drivers not to communicate with Ford and pushing them toward filing a lawsuit.
“California’s Lemon Laws are in need of reform and the courts need to exercise more oversight, given the fraud we continue to expose,” said Doug Lampe, counsel at Ford, in a statement. The law is “being blatantly abused by the lemon law plaintiffs lawyers, the bar is not policing its own and the courts need to monitor fee awards with far more skepticism and scrutiny.”
The cases, he said, “have become about the lawyers for the lawyers.”
Lemon law cases have exploded in California in the last decade from about 4,500 cases in 2015 to roughly 30,000 in 2024, according to an analysis from the Assembly Judiciary. These cases, officials warned, “are poised to cripple the entirety of California’s civil justice system.”
In 2024, the legislature tightened the state’s lemon law, requiring additional steps before a driver could sue. The bill seems to have put little dent in the caseload: Lemon lawsuits surged to record levels the following year.
Ford’s lawsuit marks the second attempt by one of America’s largest car manufacturers to go on the offense against lemon law attorneys in Southern California.
Ford sued a cohort of local lemon law firms in May 2025, accusing attorneys of collecting at least $100 million in “phantom legal fees” by billing for hours they never worked. The case, which was brought under the Racketeer Influenced and Corrupt Organizations Act, or RICO, alleged lawyers worked together to file a flurry of fraudulent cases with billable hours that defied logic.
A partner at Knight Law Group, an L.A.-based lemon law firm, once billed an “ostensibly heroic but physically impossible” 57.5-hour workday, Ford alleged.
Knight Law Group denied inflating their billing, calling the suit a “thinly veiled attempt to silence firms who would dare to hold them responsible and seek justice for consumers.”
A judge threw out the suit in March on the grounds that lawyers were protected under the 1st Amendment from being sued for the content of their lawsuits unless the case was proved fraudulent. Ford says it plans to appeal.
After Quill found about the Knight Law Group case, Ford alleged, Quill dedicated a team to “scrubbing” their own timesheets of “impossible time entries.”
Ranch dressing is having a moment thanks to the World Cup and Kraft is ready to meet it.
The company said Thursday that it is working on a “TSA Compliant Ranch” for those looking to travel with the quintessentially American condiment. The announcement follows the influx of social media videos showing international soccer fans sampling the dressing for the first time.
“Some visitors leave with souvenirs. Others leave with America’s favorite dressing,” Kraft wrote in a caption accompanying an AI image of a TSA-approved clear bag packed with ranch dressing packets posted to social media. The image showed the bag — complete with a luggage tag resembling a ranch dressing bottle — placed in an airport security screening bin along with other travel essentials.
Additional details will be announced later, the company said.
TSA has also leaned into ranch’s apparent newfound popularity among international travelers, providing some helpful tips (and warnings) on social media.
“If you’re visiting for a very large sporting event & you happen to discover RANCH while you’re here… pls pack it in your CHECKED BAG on your way home,” the agency posted on Instagram Tuesday. It also asked travelers to “avoid chugging your ranch outside security” lines.
“Who knew dip-lomacy could be achieved through addressing the obvious: ranch is the king of condiments,” TSA wrote in the caption accompanying its carousel of humorous ranch-related quips. “If you’re traveling within the U.S., make sure to keep your carry-on sauces to 3.4 oz or less and place any larger containers in your checked bags.”
“Some heroes wear capes. Others bring ranch,” it added.
According to 1987 Times reports, ranch dressing was invented by Steve Henson, who opened the Hidden Valley Guest Ranch in Santa Barbara in the mid-1950s with his wife, Gayle. The unnamed condiment originally mixed herbs and spices with buttermilk and mayonnaise and its popularity with guests led to it being jarred so they could take some home. The more travel-friendly powdered form followed.
A landmarked downtown Los Angeles apartment building designed by famed Los Angeles architect John Parkinson is on the market as its owners face foreclosure.
Residences in the Metropolitan, a 10-story tower built in 1913, are nearly filled with tenants but its ground floor retail spaces on Broadway and 5th Street are unoccupied, as are other street-level stores in downtown’s Historic Core.
The historic building was once considered one of the best in the city and is owned by the Fallas family, which operated a chain of value-priced clothing stores based in Gardena including one called Fallas Paredes in the Metropolitan.
Fallas-Paredes at 449 S. Broadway, Los Angeles, CA 90013.
(Google Maps)
Around 2011, Michael Fallas, who once worked in family’s downtown store as a stock boy, converted the upstairs floors from offices to apartments while continuing to operate Fallas Paredes. The store closed more than five years ago in the wake of a 2018 filing by its parent company for Chapter 11 bankruptcy protection.
Earlier this month in state Superior Court, a special servicer representing Fallas’ lender asked for a judicial foreclosure of the property, alleging that Fallas had stopped making payments on a $32 million loan dating to 2017. After leasing the property for years, Fallas bought the building in the 1990s.
Fallas didn’t respond to requests for comment.
The location of the Metropolitan where the buildings stands was hailed in a Times story in 1912, saying “it is regarded by many realty men as the most valuable piece of real estate in Los Angeles.”
The building today is recognized as a city historic-cultural monument because “Broadway became the commercial center of the Southland, a title it retained until well after World War II,” with its development, the city said. One of the architects who designed the Metropolitan in the Beaux-Arts style was John Parkinson, who is credited with designing such well-known local structures as City Hall, the Los Angeles Memorial Coliseum and Union Station.
Notable tenants in the Metropolitan have included the Los Angeles Public Library, Owl Drug Co., variety store J.J. Newberry and real estate company Janns Investment Co., which sold the land where UCLA is built and developed Westwood Village, among other Los Angeles neighborhoods.
In recent years, the buildings around the Metropolitan have struggled to keep retail tenants after a spurt of residential conversions of historic buildings starting in the early 2000s brought commerce to the neighborhood. Many downtown businesses have struggled since the pandemic reduced occupancy in offices downtown and reduced the flow of visitors.
“The lack of bodies on the street is generally hurting downtown, and that’s one of the reasons that has building has problems,” said downtown real estate broker Hal Bastian, who lives in the Historic Core.
There are close to 1,000 residential units in historic buildings at the intersection of Broadway and 5th Street, Bastian said, but all the ground floor stores are closed. Drug stores there suffered substantial losses from shoplifting he said, and now, “our challenge on Broadway is leasing.”
The 88 apartments in the Metropolitan are 91% rented, according to a listing for the property by the Zacuto Group, which also touts its roof deck with pool, fitness center and barbecue grills. No sale price is set.
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