While the consumers are thankful for the rollbacks on the price of gasoline, diesel, and other petroleum products, the temporary relief has made our workers in the transport sector happy, but has given our drivers little breathing space in confronting the high cost of living.
Wennie Sancho, president of the Alliance of Concerned Consumers in Electricity and Social Services (ACCESS), has noted in a statement that rollbacks in petroleum products does not guarantee that a rollback in the prices of basic goods and services will follow hence, it failed to address the high cost of living.
It has been commonly observed that “prices are sticky downward.” It is supported by an economic principle known as, “The Rocket and Feather Effects,” a term from economics, especially used when talking about prices like gas, groceries or interest rates. It generally means, when costs go up, retail prices shoot up fast – like a rocket. But when costs go down, retail prices fall down slowly like a feather drifting down. Prices go up like a rocket. Prices go down like a feather. When diesel, electricity or raw materials get expensive, stores revise prices in days. When the same costs drop prices, it will take months to go down, if ever they do, he said.
Businesses think that the rollback is temporary. Changing price tags cost money. If DTI wouldn’t penalize, why would they lower prices? The consumer paid extra when prices rocketed up. They keep on paying when businesses don’t feather down. Rollbacks do not reach the table of the workers and their families. If the market won’t fix itself, government must make prices “un-stick” because they are sticky downward. When fuel goes up, every one passes the cost to us. When fuel goes down, no one passes the savings to us, Sancho said.
This is not bad luck. This is designed so that businesses will have more profit. We see the rocket every time we pay. We feel the feather every time we don’t get relief.
When crude oil price pumps, gas stations raise pump prices within days, that’s the rocket. When crude oil price drops, gas stations lower pump prices very slowly over weeks, that’s the feather, he said.
Companies raise prices quickly to protect profit but delay cuts to keep high margins longer. Most people notice and complain about price hikes, but don’t track price drops as closely, so there’s less pressure to lower prices, Sancho said.
Consumers’ feel like prices “never come down” as fast as they go up. The effect hurts ordinary consumers directly in the wallet. Their budget gets squeezed fast, but recovers slowly. Even when the news says “oil prices down” our expenses from transportation fares to water and electricity bills are still the same or even more. Because prices are sticky downward, consumers are always down and out, he added.*
