"Sticky" Prices Defying Gravity
When the price of oil soared, so did what we paid at the pump, to more than $4 a gallon in many parts of the country.
That sent the cost of just about everything else higher.
But with the dramatic drop in the average price of gas to $2.63 a gallon, less than half what it was a year ago, we haven't seen many other prices follow suit.
What's going on? Isn't what goes up supposed to come down?
The fuel surcharges airlines imposed last summer are still around, points out Early Show national correspondent Hattie Kauffman, even though the cost of jet fuel has plunged from $4.33 a gallon to just $2.34.
Why haven't the surcharges been dropped?
" It's much a game of chicken<" explained Lars Perner, an assistant professor at USC's Marshall School of Business. "You try to hold out as long as you can, until your competitors lower their prices."
One passenger waiting in a terminal remarked to Kauffman, "I don't think they're gonna adjust prices anytime soon, because if they can keep the prices up, then why not?"
At least one U.S. senator, Democrat Robert Menendez of New Jersey, is asking carriers to drop the surcharges, saying in a letter, "I urge you pass the savings from lower jet fuel prices on to the American public by rolling back fuel surcharges and extra fees."
It's not just air passengers feeling the pinch.
Food prices remain high, too.
"Whether gas prices go up or down, we're stuck paying that same price," observes baker Moshe Hecht, who notes he's locked into paying higher prices for his ingredients at rates negotiated months ago.
You could call it "sticky prices" -- price hikes that stick.
As oil prices skyrocketed, so did the price of flour and milk. Though the price of oil has dropped, flour and milk are still stuck near their peak.
For a baker, it's not just the cost of wheat, but things such as sugar, oil, and chocolate.
"Sugar went up recently," Hecht says. "Chocolate went up. All these other ingredients are going up. ... As much as we want to help our customers, we just can't."
Copyright 2009 CBS. All rights reserved. That sent the cost of just about everything else higher.
But with the dramatic drop in the average price of gas to $2.63 a gallon, less than half what it was a year ago, we haven't seen many other prices follow suit.
What's going on? Isn't what goes up supposed to come down?
The fuel surcharges airlines imposed last summer are still around, points out Early Show national correspondent Hattie Kauffman, even though the cost of jet fuel has plunged from $4.33 a gallon to just $2.34.
Why haven't the surcharges been dropped?
" It's much a game of chicken<" explained Lars Perner, an assistant professor at USC's Marshall School of Business. "You try to hold out as long as you can, until your competitors lower their prices."
One passenger waiting in a terminal remarked to Kauffman, "I don't think they're gonna adjust prices anytime soon, because if they can keep the prices up, then why not?"
At least one U.S. senator, Democrat Robert Menendez of New Jersey, is asking carriers to drop the surcharges, saying in a letter, "I urge you pass the savings from lower jet fuel prices on to the American public by rolling back fuel surcharges and extra fees."
It's not just air passengers feeling the pinch.
Food prices remain high, too.
"Whether gas prices go up or down, we're stuck paying that same price," observes baker Moshe Hecht, who notes he's locked into paying higher prices for his ingredients at rates negotiated months ago.
You could call it "sticky prices" -- price hikes that stick.
As oil prices skyrocketed, so did the price of flour and milk. Though the price of oil has dropped, flour and milk are still stuck near their peak.
For a baker, it's not just the cost of wheat, but things such as sugar, oil, and chocolate.
"Sugar went up recently," Hecht says. "Chocolate went up. All these other ingredients are going up. ... As much as we want to help our customers, we just can't."
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