USA Today In Consummate Media Fashion Gets it Wrong on Gas Prices

On Friday February 08 the lead on USA Today's Business Page headlined "Less Driving Could Mean Lower Prices". continuing "High prices and a slowing economy are leading consumers to significantly cut back on their driving, a development that could limit the pain at the pump this spring and summer".

Then the reporter went on to quote without comment nor insight a senior oil market analyst from the Energy Information Administration, the statistical arm from our forever somnolent Energy Department, "It's prices and the economy". And that's the rub. It's just isn't that simple as much of our media purports it to be, let alone the Department of Energy. On matters relating to the price of oil, the core factor in the price of gasoline, the key role of market collusion is rarely brought into focus. Thus the colluders slide by, largely unnoticed, free to continue their machinations without the public opprobrium which in time would hold them to account.

On the very day of the USA Today article, Bloomberg reported that the Organization of Petroleum Exporting Countries (OPEC) may cut crude production when it meets next month to keep the price above $80 a barrel. This would not be the first time nor the last that OPEC actions were meant to target price or price levels. The $80/bbl price level was alluded to more than a week before in the New York Times (please see "Exxon Rakes in Record $11.6 Billion Quarterly Earnings While Cheering OPEC's Readiness to Cut Production" 02.04.08).

USA Today's reporting is an example of what is deeply wrong with the medias education of the American public on how we have become the pawns of the international oil patch, most especially OPEC. Market forces, supply and demand, are no longer the sole price determinants even though that is what the oil industry and this administration's Department of Energy would want us to believe. USA Today should know better, should educate us to the true workings and reasons for the oil markets distortions rather than obfuscate the actual issues to the glee of oil industry flacks.

Comments

[Durango]

Market theory does not explain the price of oil and gasoline.

Monopoly Theory does.

[retreadite]

How were Exxon and Mobil ever allowed to merge? No competition.

[montemalone]

Jeez! GMFordChrysler start hawking 10 MPG tanks to idiots while ExxonMobilBPShellChevron raise prices while BushCheneyRoveRummyWolfy start a war in the oil patch. Billions of US Dollars are sent to OPEC to finance the other side of the war.
How is this a surprise?

[NoMoreDrama]

Gas prices were soaring before Katrina hit a major refinery on the Gulf Coast, then gas prices dropped. When Oil was flirting with $100 per barrel recently gas leveled off then fell. Gas was a dollar a gallon in '99 then doubled once the secret energy task force got into power. The "elasticity" of Gas prices, is NOT market driven, it is politically manipulated. Lower (relatively) in election years, and spiking anytime it can.

[larry278]

A story like that makes me wonder why SLATE's "Today's Papers" covers USA TODAY which makes USAT look like a de facto newspaper of record. Why not cover one of Gannett's papers in NY too? A dumbed down rag that circulates nationwide, like USAT, which makes errors constantly isn't close to being a newspaper of record.

[ReasonIsMyReligion]

On the other hand, demand for gas is relatively inelastic.

In other words, it takes a big swing in gas prices to induce a SMALL change in driving behavior.

Put the two together, and an Econ 101 supply-and-demand example it AIN'T.

[Rule Of Law]

Collusion--you mean like when the electric (Texas based) companies screwed the state of California, and nothing happened then, either? Or, when Cheney had his energy task force come in and tell him how this would all play out and he claimed executive privilege to keep is all a secret...that kind of collusion?

[ReasonIsMyReligion]

Bingo.

[seawolf77]

NO MORE OIL YOU. Hugo Chavez, the oil nazi ,strikes at America.

[SamThornton]

The oil companies have it both ways. When demand goes down, they raise prices to maintain their profitability. When demand goes up, they raise prices because that's what the market demands.

Almost makes one wish for an American Hugo Chavez to oversee our oil industry.

[LeftRight]

Agreed, I've cut my gasoline usage as much as is possible, but I still have to drive to work every day, which is only about a gallon each way. This still means that I must use a tank a week, no matter whether gas prices are $1.00/gal, or $50/gal. Since the public transportation in this country sucks, I'm stuck driving a car to and from my job, every day...

[GetAbike]

"USA Today should know better, should educate us to the true workings and reasons for the oil markets¦"
Perhaps our non-negotiable life style puts us at the mercy of OPEC.
Maybe some of the folks trading in oil futures realize that recession or not, events on the ground along with tight supply will support prices north of $80 for the foreseeable future.
It could be that recent reports from the major oil producers indicate that reserve replacement is not going as well as the Happy Campers at CERA keep saying it will.
I dunno, is there a chance that oil exporters are using more of their own oil?
And ,um, maybe our hostile and one way street attitude towards our suppliers is wearing thin.
Just guessing.

[FearlessFreep]

One word: rationing.

[ianrey]

Right. Supply and demand are the prime forces only in a "Perfectly Competitive Market," which is so far from the case in international oil and gas prices as to be laughable. Oil prices are not set by supply, they are set by the whim of a cartel. US gas prices are not set by supply, they are set by four corporations who collude on price and agree not to compete, which might as well be a monopoly. Demand for gasoline is not elastic enough that overall need in the US will fluctuate by more than a few percentage points if prices increase or decrease. As you say, it's in the interests of the oil companies that the public think supply and demand are the only factors in determining pump prices, and that the companies themselves have nothing to do with it. Record profits show otherwise.

[research]

...But the conservatives say the market can regulate itself...invisible hand...

[TakeSake]

Keep in mind that it's their invisible hand, manipulating the market to their advantage, wiping away true alternatives and competitors, while holding up the nepotists and embezzlers.