It's unfortunate when the news media descend from reporting the news to making it by speculating that the price of gasoline is expected to rise substantially, thus transforming the speculation into a self-fulfilling prophecy.
The Pittburgh Post Gazette, among others, set the stage for the next gas hike with its article today bearing the headline "Record-setting gas prices likely to get worse."
The news media unwittingly pave the way for the price increases on behalf of gasoline producers, refiners and marketers by battering down consumer outrage in advance, so that by the time the price increase actually strikes, consumers are glumly conditioned to the reality which was triggered by the media's uncritical publication of mere suppositions.
News reports like these also erroneously link the rising price of gasoline to the rising price of a barrel of oil, now approaching a record $100 per barrel, implying a cause/effect relationship, when in fact none exists.
The vast bulk of gasoline is produced and sold into wholesale and retail markets by vertically integrated major conglommerates like Exxon Mobil, Shell, Conoco Phillips, BP and others.
They control the price of petroleum products from the wellhead where they produce the oil, downstream to the pipeline and shipping tarrifs they charge themselves to transport it, to the refineries where they process it, to the gas pump where they sell it, earning a profit at every step along the way.
Hence, the rising price of oil does not mean these major producers must raise the price of gasoline due to the higher cost of oil, since they both produce and own the oil, and profit from the higher prices for both the crude oil they produce and the gasoline they sell. In a rational economy, they should be lowering gas prices as the per barrel cost of oil rises.
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5 comments:
I watched a PBS program last week about Enron called "The Smartest Guys in the Room." The program explained how Enron ripped off the State of California by manipulating the energy production and distribution facilities that it owned. All the while, Enron and its defenders were providing seemingly plausible reasons why the cost of energy went up and rolling black-outs continued. Seems that there might be some relevance to what is going on with oil/gas these days.
Joe,
I understand your concern that talking enough about something can make it happen, but I have to disagree with your assessment that the media has no obligation to warn of future trends.
In fact, I consider it an essential part of good journalism to not only report what is happening, but be wary of what those events will mean down the road.
The price per barrel, time of year, heavy demand holidays, severe weather and political unrest can all pitch in to affect our price at the pump.
While no one has a working crystal ball, don't we as reporters have an obligation to monitor those factors and provide a "heads-up" that current trends could lead to future realities?
Scott,
Thanks for your feedback. I would agree with you only when the news media do their own research and fact-checking, rather than uncritically accepting what self-interested industry gurus tell them, which is usually the case, especially where the Erie broadcast media and the Erie Times-News are involved.
Price increase forecasts should be subject to the same scrutiny and skepticism as self-serving pronouncements from politicians. It's called telling the other side or sides of the story.
The factors you relate and others like them typically given for price increases are in my view mere pretexts. How can these events realistically affect inventory already in the supply pipeline?
And have you noticed that prices rise instantly when there's an adverse event even though its effects are far-removed in time and space, but descend glacially, if at all, long after the event has passed?
Joe:
Thanks for your insights into the oil industry. For something as important to our economy and society, most of us are clearly undereducated on how it really works.
Cheers.
Ralph
Ralph - Thanks for the comment. That's only part of the problem. The other part is the vast amount of dysinformation fed to us by the industry, pro-oil politicians who feast on its campaign contributions(which means most of them), and the news media.
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