Look at the Google Trends for “oil” in the headlines:
Kind of makes you feel like it’s not important anymore. Or is it that $3.74 gallon gasoline feels cheap and its mention doesn’t sell newspapers?
Coming down from $4.00 plus to a relatively cheap $3.74 means that prices are no longer news worthy. Well, sort of. The pressure on our wallets has eased with last month’s downward price movement, but we still aren’t seeing the bargain-basement prices that we had a year ago of $2.70 per gallon. Thinking of such a price break almost feels selfish when we so easily remember shelling out $4 for a gallon of the flammable stuff.
Recency effect is prevalent in the mental valuations we perform on a daily basis. One notable example is its emotionally draining presence in investing, where price movements are often compared to past price levels which vary for each market participant:
One of my favorite quotes I’ve seen on the topic of gas prices is from Duke’s Dan Airely:
I suspect that if I stood next to the yogurt case in the supermarket for five minutes every week with nothing to do but stare at the price, I would also know how much it has gone up — and I might become outraged when yogurt passed the $2 mark.
