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