People or the Planet?

When one looks at the environmental movement, one has to question, “Are we here for the planet—or is the planet here for us?” Of course, the real answer is complicated as each is interdependent. We could not survive without the planet, and it could survive without us—but what would it survive for? A Bible believer knows that in Genesis 1:26, God gives man dominion over the earth, it is here for us. But repeatedly, the environmental extremists attempt to make their views the law—and their views hurt mankind. “How could pushing for clean air, fresh water and a safe food supply hurt mankind?” you might ask. One ongoing case in point is the CAFE Standard, about which a recent Wall Street Journal article said, “Not one voter in ten thousand can be expected to learn how the CAFE rules work and their real consequences.” But we want you to be that one voter in ten thousand!

CAFE stands for Corporate Average Fuel Economy and is a government mandated fuel economy program. In pushing for these standards on the grounds that we must cut emissions to curb global warming, cars have become so light that automobile accident death rates have gone up. Published in April, the Institute for Highway Safety’s report on driver deaths offers the numbers from which we can make this conclusion: we may be saving the planet, but we are killing people. The statistics reinforce—again—the argument that occupants of heavy passenger cars have a better chance of surviving a collision than drivers of small sedans. Yet increasing these standards seems to be Washington’s primary gesture to show they are doing something for global warming.

Here is what one of our Energy Council Members has to say (as was posted in the New York Sun) about the new push for increased CAFÉ Standards: (Edited slightly for brevity.)

Skip This CAFE
Most of us love to stop at a café for a latte, but here is one you’ll want to skip: the CAFE standards that were voted out of the Senate Commerce Committee earlier this month. Warning: Congress is after minivans and pickup trucks.

Enacted in 1975, CAFE generally requires automakers to calculate average fuel economy—miles per gallon—across their fleets. For Democratic senators Barack Obama and Dianne Feinstein, as well as President Bush, more CAFE is better than less.

If the proposed bill becomes law, CAFE standards would rise to an average of 35 MPG in 2020 for cars, SUVs, minivans, and light trucks, defined as pick-up trucks, from levels of 27.5 MPG and 22.2 MPG for cars and light trucks respectively. Standards would rise 4% annually between 2020 and 2030. One blogger wrote about his beloved engine as "RIP V8."

The first CAFE standards, according to a 2002 National Research Council study, resulted in 1,300 to 2,600 more Americans killed on the roads in 1993, a typical year, because cars were lighter. If any pharmaceutical product had killed that many patients the manufacturer would be bankrupt. Families can sue Merck, but not Uncle Sam.

After dead motorists, the biggest losers from higher standards would be Americans who prefer large vehicles to carry families, equipment, and pets on daily trips or long vacations.

Other major losers would be the domestic car manufacturers, GM, Ford, and Chrysler, who have invested in plants that make large sedans and light trucks, Americans' preference. The industry is already restructuring to try to reduce labor costs; higher CAFE standards would be its nail in the coffin.

For several years, Americans have bought more light trucks, including SUVs, than passenger cars. Domestic companies have the bulk of light truck sales—which would bear the brunt of more CAFE.

In the first four months of 2007, Ford sold 570,000 light trucks, but only 300,000 passenger cars. Each F-Series truck makes about $8,000 in profits for the company, whereas Ford loses money on passenger cars.

Higher standards would discourage the production of new, potentially profitable high-performance sedans, such as a proposed 2009 line of rear-wheel drive GM sedans.

In contrast, foreign auto manufacturers would benefit from higher standards because most of their sales come from more fuel efficient vehicles made overseas. They would not have to change production to meet the new standards.

Their American assembly plants primarily make larger vehicles, such as Nissan Titans in Mississippi and Toyota Tundras in Texas.

President and CEO of the Association of International Automobile Manufacturers, Inc., Michael Stanton, testified before the Senate Commerce Committee on May 3 that "Nine of the top ten models on the EPA's Fuel Economy Leaders list for 2007 are manufactured by AIAM members." Quite predictably, Mr. Stanton went on to say that "AIAM supports increasing CAFE standards."

The only rational reason for consumers to ignore the price of gasoline in choosing a car is that there is something wrong with the price of gasoline. That is the implicit message every politician who advocates CAFE standards is telling America: energy markets are unreliable and wrong. President Bush, who once worked in Texas's oil industry, should know better.

It's ironic that many politicians who accuse Americans of using too much gasoline want to hold hearings on price gouging when prices rise to reflect hurricanes in the Gulf of Mexico or turbulence in the Middle East. Price increases will eventually lead to less consumption.

If energy security is the rationale for CAFE standards, America needs to increase domestic coal and natural gas production, find out whether potential supplies of oil exist in Alaska, invest in more refinery capacity, and build nuclear power plants. We've done none of these.

But if politicians want higher MPG standards so that Americans can retard global warming by reducing consumption of fossil fuels, Americans need to lower consumption of all fossil fuels, not just pick on cars.

Rather than regulating automobile size, a switch from income to energy taxes might be the most efficient and least intrusive way to reduce consumption and encourage new technology, thereby allowing consumers who want large vehicles and warm houses to have them.

Given the nature of our political system, income taxes will never get replaced by energy taxes. Just as politicians are now set to raise taxes in 2010, they will always be tempted to layer new taxes on top of old, increasing inefficiency and slowing economic growth.

If markets really are unreliable—which is yet unproven—then regulating cars' fuel efficiency is the wrong way to go. Neither global warming nor energy security require increased CAFE standards, which are both anti-economic and anti-intellectual. They are made for a political system where appearance trumps substance.

Automotive fuel efficiency is rising without government regulation, even as engine power increases. As Americans replace older cars with newer ones, fuel efficiency improves.

Over past decades, gasoline mileage has been rising steadily and voluntarily, and this process is continuing. The new GM direct injection 3.6 liter V6 engine, starting in the Cadillac STS this year, gets both more fuel efficiency and power than the previous V6. Every time GM brings out another Escalade it gets better fuel efficiency—and more power.

Politicians need to reflect on which national problem would be best solved by higher CAFE standards—other than how to bankrupt the American automobile industry.


(This Op-Ed was featured in The New York Sun edition of May 25, 2007.)

Diana Furchtgott-Roth is a senior fellow and director of Hudson Institute's Center for Employment Policy. She is the former chief economist at the U.S. Department of Labor.

The Planet is Sick

In his “award winning” film, An Inconvenient Truth, Al Gore declares that “the planet is sick.” Most of us would agree that there are numerous things wrong—and global warming may not be the biggest problem—but the ailments may not warrant the death sentence the environmental extremist’s prescribe. If you were given a dire prognosis by your doctor, would you shrug, accept his (or her) opinion, and go home to die? No! You’d go and get a second opinion—maybe a third. You’d do research on the disease. You’d learn all you could before you gave in and made extreme changes in your life in the hope that the unproven methods may improve your chances for survival. Why then, when the “doctor” (whose credentials are questionable) has pronounced a virtual death sentence on the planet, has the American population suddenly accepted the diagnosis without getting additional opinions, without doing research?

At CARE we are not claiming to be the expert on the topic of global warming, but we do believe there is other opinion worthy of consideration. We do think the public needs to know some of the other research. Here (in many different postings) we present the “other side,” not specifically because we are crusading for this view point, but because the “planet is sick” side is adequately covered through the mainstream media. The “responsible” view is scoffed at, and skeptics have received death threats for presenting their opposing ideas in a public forum. For those who seek a second or third opinion, we have gathered some data that we think will help in your search for answers and will help you form your own responsible opinion. Do these insights help you? Please add your comments.

The New Math On Global Warming
The UN climate change panel told us in 2001 that human-emitted CO2 might drive the planet’s average temperature upward by 5.8 degrees C—a bigger average warming than the world has had in the past 100,000 years. The UN’s 2007 report scales the possible overheating back a bit, to a maximum of 4.5 degrees—still a very large warming.

But wait! The environmental movement is now conceding that the earth has a natural, moderate climate cycle. Jon Coifman of the Natural Resources Defense Council said recently on the Hannity and Colmes TV show, “The earth has natural temperature and climate cycles. Nobody has disputed that.”

We’re glad that the NRDC finally accepts the natural warming cycle as fact. Until Coifman’s admission, I don’t think the words “natural climate cycle” had ever escaped the lips of a climate alarmist.

The historic evidence of a moderate, natural 1,500-year climate cycle includes Roman writings, Egypt’s early Nile flood records, and ancient Chinese court documents. The scientific evidence confirming the cycle has been literally “dug up” in the past 25 years, primarily from the oxygen isotopes in long, layered ice cores, and the one-celled fossils in the bottom sediments of lakes and oceans.

My favorite temperature proxy is North America’s fossil pollen, which shows our continent has had nine complete shifts in its trees and plants over the past 14,000 years—or one every 1650 years. In my native Michigan, the pollen says the forests during the warmings have been dominated by warmth-loving beech trees, with more oak trees intruding as the climate cools, followed by more pine trees. Today, 150 years into a warming, the pine trees are giving way again to the oaks, and the beech trees are waiting their turn.

Coifman is still talking about the planet passing a “crisis tipping point.” He doesn’t seem to realize that the existence of this natural cycle profoundly changes the math on global warming. The eco-movement and Al Gore have been repeating the mantra that “the earth has warmed 0.6 degree C in the last century.” They claim this has been due to more human-emitted CO2, and project Big Warming on that basis. When we plug in the 1,500-year cycle, however, we have to take away from the scary computer models the 0.5 degrees of warming that occurred before 1940—and thus before much human-emitted CO2.

The earth has warmed only a net 0.2 degrees C of net warming since 1940. Human-emitted CO2 gets the blame for only half of that—or 0.1 degree C of warming over 65 years! We’ve had no warming at all since 1998.

Remember, too, that each added unit of CO2 has less impact on the climate. The first 40 parts per million of human-emitted CO2 added to the atmosphere in the 1940s had as much climate impact as the next 360 ppm.

Why does NRDC say that the earth has reached a “crisis tipping point” when we’ve had only 0.2 degrees C of warming over the last 65 years—and no warming at all over the past eight years? How do the Greens project a mind-numbing surge of global warming from this New Math on Global Warming?

Is the emerging evidence of the natural cycle the real crisis for Al Gore and the warming alarmists?

DENNIS T. AVERY Center for Global Food Issues

"Fairly Cheap" Gas Prices

Several interesting new pieces have come to our attention at CARE that will shift our topic away from gas prices--just as the prices are dropping. But before we move away, we want to offer you this insight from Alex Economides, edtor of The Energy Tribune.

Despite the rhetoric that has spread widely throughout the news, gas prices are still low by historical standards. This graph represents a very fair estimation of the actual cost of using gasoline over its history. By using real dollars, and factoring in the contribution that gasoline prices pay to our economy, it can be seen that prices are still fairly cheap.

Media Spread Suspicion of Gas 'Gouging'

A recent Gallup Poll ranked the oil and gas industry 25th out of 25 in the consumer's view with a minus 65-the most negative rating for any industry ever that Gallup has measured. It is no wonder when this is the kind of reporting afforded to the industry:

It’s déjà vu all over again. Rising gas prices and oil companies’ “record profits” fuel an almost yearly call for investigations into “price gouging.” The media then complain of alleged wrongdoing and fail to ask intelligent questions about the issue.

“Kinda suspicious, huh?” said CBS’s Julie Chen when “Early Show” co-host Harry Smith mentioned that “higher than ever” gas prices are prompting politicians to call for another investigation.

“It makes you wonder at least a little bit,” replied Smith on the May 23 show.
The House of Representatives passed a bill that same day that would outlaw “price gouging” – without really defining it – and is now being considered by the Senate Committee on Commerce, Science and Transportation.

Never mind that there have been more than 30 investigations into price gouging over several decades, and no conspiracy by oil companies has ever been found, according to the American Petroleum Institute (API). Or that 28 states and one territory already have their own price gouging laws on the books as of 2004.

But the price of gasoline almost always makes the media suspicious, even when it’s going down. CNN’s Jack Cafferty proposed a conspiracy theory in August of 2006 that oil companies were artificially lowering the price of gas to re-elect Republicans.

“You know, if you were a real cynic, you could also wonder if the oil companies might not be pulling the price of gas down to help the Republicans get re-elected in the midterm elections a couple of months away,” suggested Cafferty on the Aug. 30, 2006, “Situation Room.”

Of course, we know how that turned out.

But They’re Making Money!
Even when government investigations came up empty, finding no evidence of oil company price gouging, journalists continued to be “suspicious” of the oil and gas industry, complaining about profits and tarnishing their reputation.

CBS, which is consistently the most negative network for economic reporting according to Business & Media Institute research, has a history of promoting price gouging rhetoric.

In a May 23 interview of Florida governor Charlie Crist, who along with 21 other governors is asking Congress to investigate high gas prices, “Early Show” co-host Hannah Storm threw him softball questions and didn’t include any opposing arguments.

Storm asked how high gas prices were hurting Florida; if Crist thinks “oil companies are gouging consumers;” what concerned him in the 2005 investigation; and if the lack of new refineries is a problem.

At one point in the interview, Crist said, “[Y]ou have to reach the conclusion that, you know, they’re gouging people.” There was not a word of disagreement from Storm.

Moments later, Storm remarked, “last time prices shot up like this, Governor Crist, the oil companies said, ‘Look, we can’t help this. We can’t control prices.’ And then they turn in these record profits. I mean, how does that make you feel …”

“Let’s hope you get this investigation that you and the other governors are pushing for,” Storm gushed to close the interview.

The “record” profits Storm referred to are a common media argument. Oil companies make record profits in dollars because in they are enormous businesses, but the percentage of profit is lower than many other industries.

According to an op-ed by Cato Institute senior fellows Jerry Taylor and Peter Van Doren, oil companies had a 9.5-percent profit margin last quarter.

In 2006 Exxon Mobil, a much larger company, made a profit of $39.5 billion – 10.5 percent of their $377.6 billion in earnings.

In fact, CBS itself had a greater profit margin than that. In 2006, the company made $1.66 billion profit – 11.6 percent of their total earnings of $14.3 billion.

And other media companies have even higher margins. David Carlson, former president of the Society of Professional Journalists, wrote that “even in today’s difficult climate, many newspapers turn an annual profit greater than 25 percent.” That wasn’t even the top. “One national chain reportedly demands 30 percent profit from each of its newspapers,” he continued.

Guilty Until Proven Evil
But comparisons were missing when CNN’s “In the Money” team welcomed anti-industry rants from Rep. and would-be president Dennis Kucinich (D-Ohio) on April 21, 2007.

“It seems the profits for these companies keep going up and the American consumer doesn’t have anyone intervening on his or her behalf,” Kucinich said as the reporters indulged his conspiracy theories.

The media also left out the liberal leanings of so-called “industry watchdogs.”

NBC “Today” reporter Michael Okwu cited “industry watchdog” Judy Dugan on May 3 and blamed oil companies for “gouging consumers by indirectly controlling the supply.” But just like the January 16 USA Today, Okwu left out Dugan’s anti-industry slant, conspiratorial opinions, and 2006 support for California voters to approve a “profit-based levy on companies that extract oil in California.”

Even when official investigations found no wrongdoing, that didn’t affect reporting much.

“CBS Evening News” correspondent Sandra Hughes reported price fixing allegations by the California attorney general back on June 5, 2006. Just two short weeks earlier, CBS “Evening News” ignored an announcement on May 22, 2006, by the federal government that there was no concerted effort by the oil industry to manipulate gas prices.

Hughes’ June 5 report also excluded the government conclusion that there had been no systemic price gouging following Hurricane Katrina, only localized incidents.

The same government report confused CNN contributor and now Fortune magazine managing editor Andy Serwer, who said it “boggles the mind.” “American Morning” host Miles O’Brien said it wasn’t “good news for the little guy.” So it would have been good news if the oil industry had been committing a crime by conspiring to jack up pump prices?

What They’re Not Telling You
The media consistently leave out economists, industry experts, oil companies and the facts about price gouging.

CBS interviewed Gov. Crist, who alleged price gouging was causing higher gas prices, but the “Early Show” didn’t include any other reasons for the high gas prices like regulation, taxes, or increasing demand for gasoline.

The networks didn’t criticize the House bill that would criminalize the sale of gasoline at “unconscionably excessive” prices.

But a May 25 USA Today editorial did criticize the bill, saying it “would criminalize free enterprise” and could cause shortages.

The same editorial cited the Energy Department when it said “the U.S. refining and marketing industry has been characterized by unusually low product margins, low profitability, selective retrenchment, and substantial restructuring throughout the decade of the 1990s.”

Taylor and Van Doren pointed out in their May 25 column that the House bill failed to define its own terms:

“What constitutes taking ‘unfair advantage’? Congress doesn’t say. Apparently, taking ‘fair advantage’ of motorists is O.K. And what is an ‘unconscionably excessive’ price? Again, silence. Presumably, ‘conscionably excessive’ pricing is O.K., as is ‘unconscionably high’ prices if we posit that there is a difference between a ‘high’ price and an ‘excessive’ price,” they wrote.

Of course one of the reasons gas prices rise is too simple for the media to bother reporting. Demand is growing and supply has had its disruptions, which resulted in increasing prices.

NBC “Today” show reporter Okwu and CBS “Early Show” co-host Hannah Storm both mentioned the problem of limited refining capacity, which in turn limits the supply of gasoline.

One reason oil companies are unlikely to build new refineries is because of the huge government push for alternative fuels. The New York Times pointed this out in a May 20 column.

“If that’s the plan, will oil companies want to invest in more refineries? ‘You’ve got to ask whether the demand will be there’,” the Times quoted John Felmy, chief economist of API.

By Julia A. Seymour

Business & Media Institute

Will Gas Prices Go Down for the Summer Driving Season?

Becasue of CARE's involvement in energy, we are frequently asked about the price of gas. Last year CARE did two special reports on the topic which are still available on our website--though they are not updated. While we are on the topic, here is an Op-Ed written by a source not affiliated with CARE and also not connected to the energy industry. We read it, we liked. Tell us what you think! (Edited slightly for brevity, see the full version at The Hudson Institute.)

Get Pumped
As New Yorkers recently discovered, when crude oil prices jump, gasoline prices can jump even more. But though oil sheiks in the Middle East and President of Venezuela, Hugo Chavez, are convenient scapegoats, the real problem lies closer to home — our shortage of oil refining capacity.

Congress has discouraged the construction of new refining capacity through proposed legislation that punishes refiners when prices rise, that gives extensive and expensive permit requirements for construction of new refineries and expansion at existing sites, and that allows for tort risk. These policies need to be reversed.

A widely-respected non-profit research institute, the Energy Policy Research Foundation, published a report this month on our refinery sector titled "The Silent Disruption." It persuasively documents the difficulties of transforming barrels of oil into gasoline and heating oil.

In February 2007, pump prices fell to a recent "low" of $2.36 per gallon in New York, according to the American Automobile Association, and the price of oil was about $57 for a 42-gallon barrel. Now, refiners must pay about $67 for crude oil, a 17% increase. But the average price of gasoline in New York, $3.11 per gallon, has jumped 32%, equivalent to crude at $90. How does a rise of $10 per barrel (24 cents per gallon) become 75 cents more a gallon at the pump?

"Surprises get priced," president of EPRINC, Lucian Pugliaresi, says. He writes, "Rising gasoline demand in the U.S., combined with unscheduled refinery closings, looming strikes, limited spare replacement capacity, longer turnaround times for scheduled maintenance, and refining factors are all contributing." No new refinery has been built in America for 30 years.

For those reasons and others, refiners' inventories of gasoline are low. Inventories serve as a cushion against disruptions of supply. So does spare refining capacity, of which there is none.Inventories have declined from February highs, and now stand at 192 million barrels, equivalent to about three weeks of supply, barely above the low point of 190 million barrels that occurred just after Hurricane Katrina.

Unforeseen shutdowns have dropped the national average for refinery capacity utilization down to 88% from the usual 93%. Sinclair Oil's refinery in Wyoming is shut for 10 days of maintenance due to a power outage on May 6. It would ordinarily refine 71,500 barrels of oil a day into gasoline, diesel, and jet fuel.

On April 27, Gary Williams Energy Corp.'s 50,000 barrel a day refinery in Oklahoma closed down due to a rare surprise: lightening hit a storage tank. That refinery was already working overtime because Valero's 170,000 barrel a day refinery in McKee, Texas was closed due to a fire on February 16 and still is not running at full capacity.

Not only is supply down, demand is up. So far this year Americans have consumed 2% more gasoline, 200,000 more barrels a day, than in 2006. In early May, Americans used 9.3 million barrels of gasoline per day, of which 1.1 million were imported.

The spring season usually sees a spike in gasoline prices when refineries change their mix of output from winter to summer blends of gasoline to satisfy clean air mandates. Refiners shut down their plants and clean the tanks. This customarily results in a price rise, but the 2007 price bump is much higher than usual because of low inventories.

An obvious remedy would be to build new refineries, expand existing plants, and import more gasoline. But it's impossible to find a community that will approve a new refinery. People like to fill cars up at low prices, but they don't want a refinery close to home.

Why don't we import more gasoline? According to Mr. Pugliaresi, "Refineries abroad are expanding, but they can't expand fast enough to meet global demand. Exxon builds a refinery abroad every 3 years." There's nothing wrong with importing gasoline from abroad, but if more refineries were built here, our workers would get the jobs and our supplies would be more secure.

The good news is that as the summer fuel reaches gas stations, prices are likely to decline — barring no more surprises. But our system is stretched so thin that it continues to be vulnerable to refinery fires and hurricanes. To avoid price spikes, Americans need to take the long view and increase refinery capacity at home.


This Op-Ed was featured in The New York Sun edition of May 11, 2007.
Diana Furchtgott-Roth is a senior fellow and director of Hudson Institute's Center for Employment Policy. She is the former chief economist at the U.S. Department of Labor.

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.

What's That Got to Do With the Price of Tortillas?

Before moving off of the food or fuel question, we must address the aforementioned topic of the price of tortillas. While this is now old news, it apparently slipped under the radar for many as most seem to think it is a joke when addressed in general conversations. (Try it. Read this short piece and, for more information, the full article linked to it. Then mention this information in casual conversations with your friends, family or coworkers. In general settings, you’ll get a baffled response. Let us know what kind of response you get by posting your comments here.) The issue of the price of tortillas was brought to CARE’s attention through a small mention at the end of a feature in the Energy Tribune magazine. While the Energy Tribune is a trusted source, more research needed to be done. A simple Google search pointed to articles done on the topics from both the Washington Post and the New York Times—just to name a couple of the more notable sources. Here is a summary of what we found: (edited primarily from the Washington Post article for brevity)

Tens of thousands of workers and farmers filled central square in Mexico City on January 31 to protest spiraling food prices. Most analysts agree that main cause of increase in price of tortillas has been spike in corn prices in United States as demand for corn to produce ethanol.

Mexico is in the grip of the worst tortilla crisis in its modern history. Dramatically rising international corn prices, spurred by demand for the grain-based fuel ethanol, have led to expensive tortillas. That, in turn, has led to lower sales for vendors and angry protests by consumers.

The uproar is exposing this country's outsize dependence on tortillas in its diet--especially among the poor. Tortilla prices have tripled or quadrupled in some parts of Mexico since last summer.

"Going ahead, it looks very good for high corn prices," said William Edwards, an agricultural economist at Iowa State University.

In another place, a rise in the cost of a single food product might not set off a tidal wave of discontent. But Mexico is different. "When you talk about Mexico, when you talk about culture and societal roots, when you talk about the economy, you talk about the tortilla," said Lorenzo Mejía, president of a tortilla makers trade group. "Everything revolves around the tortilla."

Poor Mexicans get more than 40 percent of their protein from tortillas, according to Amanda Gálvez, a nutrition expert at the National Autonomous University of Mexico. Modern-day tortilla makers use "an ancient and absolutely wise" Mayan process called "nixtamalizacion," Gálvez said. The process is straightforward. Large kernels of white corn are mixed with powdered calcium and boiled, then ground into a dough with wheels made of volcanic rock. The resulting tortillas are more pliable and more durable than those typically found in U.S. stores. Mexicans say tortillas are their "spoons" because they use them to scoop up beans, and can serve also as their "plates" because they're sturdy enough to hold a pile of braised meat and vegetables.

Gálvez said she believes the price increase is already steering Mexicans toward less nutritious foods. The typical Mexican family of four consumes about one kilo--2.2 pounds--of tortillas each day. In some areas of Mexico, the price per kilo has risen from 63 cents a year ago to between $1.36 and $1.81 earlier this month.

Many poor Mexicans, Gálvez said, have been substituting cheap instant noodles, which often sell for as little as 27 cents a cup and are loaded with less nutritious starch and sodium.

There is almost universal consensus in Mexico that higher demand for ethanol is at the root of price increases for corn and tortillas. Ethanol, which has become more popular as an alternative fuel in the United States and elsewhere because of high oil prices, is generally made with yellow corn. But the price of white corn, which is used to make tortillas, is indexed in Mexico to the international price of yellow corn, said Puente, the Mexico City economist.

Mexico, which counts corn as one of its major agricultural products, now faces a shortage and will now have to import more than 800,000 tons of corn from the United States and other countries.