As President Donald Trump is demanding a federal investigation into why retail gas prices aren’t plummeting as rapidly as crude oil costs, economist Paul Krugman argued that the current $3.92 national average is simply acting like “feathers” drifting down after a major global supply shock.
The ‘Rockets and Feathers’ Effect
The national average for regular gasoline currently sits at $3.928 per gallon. While this is down from $4.515 a month ago, it remains significantly above last year’s $3.224 average, according to AAA data.
Instead of corporate price-gouging, Nobel laureate Krugman recently outlined, in a Substack post, why consumers are experiencing this lag.
Krugman described a “well-documented pattern” in how fuel markets respond to international shocks. “When there is a global shock that causes the price of crude oil to soar, gasoline prices rise like a rocket,” Krugman wrote.
“But when the crisis is over and crude prices plunge, the price of gas declines only gradually — it drifts down like feathers.”
Midterm ‘Lifejackets’ Needed?
Despite the recent lifting of the U.S. blockade and the reopening of the Strait of Hormuz, the timeline for economic relief clashes with Trump’s political calendar. Krugman noted that the president is “desperate to end the war” because of the steep political price of high fuel costs, with midterms only more than four months away.
Because of the delayed drop in consumer costs, Krugman predicts that gasoline prices will remain elevated for months, thwarting “hopes of quick political relief.” Ultimately, he suggested the GOP might need to find “some lifejackets” ahead of November.
Trump Demands DOJ Probe
In a Wednesday Truth Social post, Trump targeted major energy producers, stating that “Oil Companies” are not dropping pump prices commensurate with the “sharply lower prices they are paying for Oil.”
Emphasizing that crude costs are “dropping like a rock!”, the president concluded that customers are facing artificial price inflation.
“In other words, customers are being gouged,” Trump wrote. He declared that he has “instructed the DOJ to immediately start looking into this,” warning that “Gasoline prices better start going down a lot faster than what I’m seeing!”
Crude Prices Fall As Geopolitical Tensions Ease
At the last check, WTI Crude Oil futures were trading lower by 1.67% to hover around $71.99 per barrel. Whereas Brent Crude Oil futures tumbled by 1.52% to $75.63.
The exchange-traded fund tracking Brent futures, United States Brent Oil Fund LP (NYSE:BNO), has declined 22.65% over the last month, but it was up 49.16% year-to-date. BNO tumbled 1.34% in premarket on Wednesday.
Meanwhile, WTI tracker, United States Oil Fund LP (NYSE:USO) was 21.05% lower over the month and up 59.54% YTD. It was down 1.81% in premarket on Wednesday.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Image via Shutterstock
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