Monday, May 21, 2007

The Media's Gloom and Doom About Gas Prices

With today’s price of gas topping previous historic highs, it seems apropos that we open a dialogue on the topic. Interestingly, according to the Lundberg Letter, Gas is only $.05 a gallon more than it was in March of 1981 (adjusted for inflation). The Energy Information Administration’s 2005 report (the most recent) on motor vehicle mileage determines at US consumption continues has been in the low 500 gallons a year for most of the last two decades—with their most recent published figure at 557 gallons per year, per passenger car. Doing the simple math, that means that the adjusted for inflation figure has the average driver paying $2.32 more a week for gas at today’s prices—less than the price of a latte at Starbucks—or $27.84 a year. Looking at the numbers another way, two months ago, we were happily paying an average of $2.60 a gallon. Today’s high is an increase of $.58—which comes out to an increase of $6.21 a week, 26.92 a month, or 323.06 a year. Meanwhile the price for a barrel of crude oil, remained stable at around $65. Yet the media is having a field day with gloom and doom reports. Below is a report from a member of our Energy Council: Dan Gainor. (Edited for brevity)

Gassing Up: Networks Warn About $4, $5, or $6 Gasoline. Maybe One Day They'll Be Right.

Gas prices have again passed $3 a gallon. But Americans should be used to high prices by now – the mainstream media have been warning them of $4, $5 and even $6 a gallon for more than two years. According to a May 7, 2007, CNN poll, “more than three quarters of Americans” think they'll have to pay more than $4 a gallon this year. It’s no wonder. The media have been telling viewers that for years.

If you want to drive faster, you hit the gas. Network news shows that want higher ratings do the same thing, except they hit gas prices.

Since Jan. 1, 2005, ABC, CBS and NBC have mentioned prices that high in at least 70 stories. Network evening and morning show stories hyped the high prices in high-tax, high-regulation states like California. They also relied on expressions like “approaching,” “closing in on,” “bumping up against” and “just around the corner” to indicate $4 gas was on the way.

But $4 a gallon never happened. It never even came close. Despite all the network hype--with the exception of the current spike, the average national price for a gallon of regular gas topped out at $3.06 on Sept. 5, 2005, after Hurricane Katrina took a toll on the nation’s distribution system. And that’s still 16 cents below the number economists would use – the inflation-adjusted record high of $3.22 from March 1981. As far back as two years ago, NBC was talking about $5 gasoline. On the May 20, 2005, “Today,” reporter Carl Quintanilla asked the audience to picture a scary future. “Imagine a world with $5 gasoline. What would you do?” he asked.

From Jan. 1, 2005, through May 8, 2007, major news events were consistent opportunities for reporters to caution about $4-a-gallon or higher gas prices. Reporters underlined the danger of hurricanes, Mideast war and terrorism, along with U.S. regulatory roadblocks and refinery fires.

When Iran kidnapped 15 British sailors and marines, CBS’s Anthony Mason warned of a potential cataclysm. If Iran shut the Straits of Hormuz, Mason said, energy prices could spike. “In a heartbeat, oil could hit $100 a barrel. Imagine gas at $5 a gallon,” he predicted on the March 30, 2007, “Evening News.”

Iran announced the 15 would be freed just days later. Gas prices had increased about four cents in that time.

It was one of many predictions that turned out wrong.

The Jan. 21, 2006, “NBC Nightly News” brought on oil expert John Kilduff, who said high oil prices could be destructive. “I think $70 per barrel could prove to be the breaking point for the economy,” he warned.

Reporter Rosalind Jordan responded by piling another incorrect claim on top of that one. “Meaning gasoline $4 to $5 a gallon, heating oil and jet fuel just as expensive,” she said.

Oil prices went above $78 a barrel in August 2006 and the economy continued to flourish. Gas prices hit $3.04 that month. Both the “expert” prediction and the journalistic claim were quite wrong.

$4 Is Just a Start

Why worry about $4 a gallon when the networks warned gas prices will even go higher than that? At least 20 times since Jan. 1, 2005, the big three networks mentioned prices hitting $5, and another six times for $6 or higher.

Gas prices became a common network component of bad news. A May 8, 2007, “Good Morning America” story linked the possibility of $4 gas to a stock market crash. Host Diane Sawyer dwelled on the dangerous combination. “Will runaway gas prices keep soaring, and did you know that the stock market has hit a milestone reminiscent of what happened before the big crash?” she asked.

When ABC warned about a possible terror plan to target America’s oil supply, what stood out was the huge potential increase in price. The Jan. 8, 2007, “World News with Charles Gibson” was introduced by Gibson who told viewers ominously, “A militant network targeting America’s oil supply and triggering fears of $6 a gallon gas.”

High gas prices figured prominently in good news stories as well as bad ones. It didn’t matter if the stock market went up, gas prices went down or global tensions eased; network journalists found some way to talk about the threat from expensive fill-ups.

When gas prices declined, ABC naturally warned of their going up – to $4 a gallon. During the Oct. 11, 2006, “Good Morning America,” host Diane Sawyer mentioned the price had dropped and “that’s the ninth straight week that prices have gone down.”

While the story detailed the price decline, it wasn’t how reporter Dan Harris ended his piece. “But, and there’s always a but when it comes to gas prices, this could all change if winter is harsh, if Mideast tensions flare once again, or if the oil producing countries get their act together and seriously cut back on production.”

In other words, the good news of lower gas prices could go bad any minute.

That was the same strategy deployed by CBS’s Anthony Mason. In a July 13, 2006, “Evening News,” story, he claimed the market for oil is never good, even when peace breaks out. “Even if political tensions ease, analysts say, gas prices are likely to get worse before they get better.”

They did get worse--just not by much. Prices rose a mere 8 cents before dropping like a stone.

A TV Camera or a Crystal Ball?

News typically focuses on current events, but not with gas prices. Journalists trot out experts who predict what might or might not happen to oil or gas prices. And when that doesn’t work, the reporters go into the fortune-telling business themselves. The 70 stories in this study included at least 52 references to high gas prices that might someday occur.

Not one of the national predictions came true.

Reporters relied on “analysts” or “some analysts” to caution about the most devastating price hikes. CBS’s Rene Syler relied on those “analysts” to predict a huge increase in prices during the May 3, 2006, “Early Show.”

“Oil prices are spiking again. This morning, sweet crude was nearing record highs trading for $74.87 a barrel,” she explained. “But some analysts predict much higher prices by winter, and that could push gasoline prices to $5 a gallon.”

Ann Curry of NBC’s “Today” showed the concept wasn’t confined to CBS. Her Sept. 23, 2005, story detailed the damage from Hurricanes Katrina and Rita. “At least one analyst predicts that gas prices could hit $4 a gallon within two weeks,” she said. Within two weeks, national gas prices had gone from $2.75, when Curry made her comment, to $2.94 and were already dropping again.

NBC’s Anne Thompson also relied on those “analysts” for her gloomy July 14, 2006, “Nightly News” report. “If you think $3 gas is bad, what about four? Analysts say it could be just around the corner because of the fighting in the Middle East.”

She drew support from expert Phil Flynn, an Alaron oil analyst. “If it goes bad, we could be talking 4, 4.50, maybe even $5,” he said. If that wasn’t scary enough, Thompson ended her report with more worries. “All this on fear, without a hurricane or other major event that really squeezes the world’s oil supply.”

NBC had even worse luck with expert John Kilduff, of the brokerage FEMAT USA. Kilduff made an April 23, 2006, “Nightly News” prediction that didn’t even come close to being accurate. “Gasoline prices are going to continue to soar well over $3 a gallon on the national average. More unfortunate folks will be paying upwards of 3.50, 4 and maybe even $5 a gallon as we hit into mid-June and early July.”

Gas soared nationwide to $3.04 at its 2006 peak.

Many of the bad predictions relied on incorrect assumptions about oil prices.

A July 16, 2006, report showed oil trader Eric Bolling warning that war in the Mideast could lead to “$100 [per] barrel” for oil. CBS Reporter Anthony Mason followed that “Sunday Morning” comment with this claim: “That would push the price at the pump well over $4 a gallon.”

Neither came true. Oil topped out at $78.64 in early August and gasoline barely passed $3 nationwide.

There Was Some Good News

CBS offered more good news than both ABC and NBC by relying on the more rational assessment of Tom Kloza from the Oil Price Information Service. While many experts were predicting $4, $5 or even $6 a gallon, Kloza was going the opposite direction.

The April 25, 2006, “Early Show” was one ideal example. When Kloza was asked about $4 or $5 gas by reporter Sharyl Atkisson, he called it “a lot of fearmongering.” “I think you could see 4 to $5 a gallon if you bring your car back to the car rental without filling it up or if you’re looking at a couple of rogue stations in places like Rodeo Drive or Palm Beach or whatever.”

CBS used Kloza in roughly one-fourth of all stories about $4-a-gallon or higher priced gas (6 out of 26). Julie Chen of “The Early Show” called him “an optimist,” but he was more of a realist. Kloza was consistently proven correct by events.

On May 2, 2007, he told the “The Early Show” that he didn’t think gas prices would hit $4 in 2007. “I don't think it's a stepping stone up to 3.50 or $4 or some of the apocalyptic numbers you hear,” he explained.

Conclusion

Gas prices are cyclical. High demand, lack of new refineries, high regulation and higher taxes all contribute to rising prices. But that doesn’t excuse the hype and the seemingly endless stream of journalistic predictions. Gas prices had journalists chomping at the bit while they were going up and caring little when they came down.

Former “CBS Evening News” anchor Bob Schieffer summed up much of what was wrong in the network reporting on high gas prices. In an Aug. 30, 2006, account, he managed to downplay the good news of declining prices and predict an ongoing problem. “Whatever the short-term prospects for gas prices, though, over the long haul, it is clear the days of cheap gas are over,” he claimed.

After Schieffer’s comment, gas prices dropped every business day until mid-October.

Dan Gainor

Read the complete report at businessandmedia.org.

1 comment:

Bob McCarty said...

In a April 28 post on my blog, Bob McCarty Writes™, I wrote this about U.S. Senate efforts to impose a tax on "major oil companies' profits'. I thought it might interest you:

"I read in an article this morning that Sen. Robert Casey (D-Pa.) and seven other U.S. senators are proposing a tax on major oil companies’ profits from crude oil priced at more than $50 a barrel. The goal, apparently, is to tax the so-called “excess” profits and use them to help “poor” people pay for gasoline.

"As the son of an Oklahoma oil man (who could have displayed an “Oil Feeds My Family & Pays My Taxes” bumper sticker on his car, but didn’t), I know what happens in this country when liberals in Congress decide to make “Big Oil” their whipping pony. And I know this most-recent proposal, if it makes its way to becoming a law, won’t work for several reasons:

When government raises taxes on a particular type of business activity, people involved in running those businesses are forced to determine whether their business can adapt to that change or not. In Oklahoma, where I spent my first two decades of life, many owners and operators of oil-related businesses — and businesses that served the industry! — adapted by laying off 400,000 people in Oklahoma alone during the 1980s. Others couldn’t adapt and were forced to close their doors. As a result, our country became more dependent than ever on foreign sources of oil — the last thing we needed.

Senators like Casey need to realize that higher taxes on oil companies will simply be passed on to consumers — including poor consumers — in the form of higher prices at the pump. Why? Because these companies operate in a lean manner already, painfully aware of the impact past government interventions had on their industry (see above paragraph).

The stated plan to help “poor” people pay for gasoline stands simply as another left-wing liberal (a.k.a., “socialist”) attempt to redistribute wealth, and such practices don’t work. Instead, they result in generations of people becoming dependent on entitlement programs. For further proof, one can compare pre- and post-communism life in many of the former Soviet-bloc countries of Eastern Europe. There’s no comparison. Socialism doesn’t work.

Finally, the senators will tell you they are only taxing profits from oil priced at $50 a barrel or higher when, in reality, that translates to “all oil” sold. Why? A look at the history of oil prices will show you that the price of oil won’t go down until we shift to and commoditize an alternative form of fuel.

Senator Casey and his tax-loving colleagues in the U.S. Senate need to know that liberal socialist legislation like this hurts oil companies, hurts individuals and, worst of all, will do nothing to reduce our country’s dependence on foreign sources of oil. If it passes, you might find yourself wearing Will work for fuel -- http://www.cafepress.com/bobmccarty/1732155 -- t-shirts in the not-too-distant future.