I’d like to thank President Obama for giving me a $400 payroll tax cut. I’d sure like to help out with the economic recovery.
But that tax cut, thanks to 41 consecutive days of gasoline price increases, now amounts to only $150. Figuring my local commuting habits and trips to visit family and friends, I’ll pay about $700 to fill up my little Scion for the rest of the year at the current national average of $2.62 a gallon. I’ll be spending about $250 more at this price than I would if gasoline had remained near the December average of $1.62.
If the price of gasoline rises more (wanna bet?) over summer, I’ll be handing even more of my payroll tax cut to Big Oil.
So why the sharp, 62 percent increase? Why did the “experts” who are supposed to understand gasoline and oil markets get it wrong? Journalists have indeed been telling us the “experts” were wrong and what factors have been driving gasoline prices higher — but not why the “experts” erred in missing those factors.
According to New York Times reporter Clifford Krauss:
Analysts say the increase is being driven by investor expectations of an economic recovery, the recent fall of the dollar against other currencies and, to a lesser extent, the success of oil-exporting countries in curtailing supplies.
In other words, these are the issues that helped drive gasoline costs well beyond $4 last year. Motorists are accustomed to gasoline prices spiking as the summer driving season arrives. But 62% higher this year when “experts” predicted far less?
Journalists depend on “experts” and base conclusions on their analyses. Here’s CNN business correspondent Christine Romans on March 17:
Gas prices are rising. Experts say they won’t rise much more and the Energy Department sees a summer high of $2.30. Don’t worry: this recent run up is no stepping stone to $3.00 and $4.00 a gallon gasoline. [emphasis added]
From the Energy Information Administration’s “Short-Term Energy and Summer Fuels Outlook” published April 14:
Regular‐grade gasoline prices have increased to more than $2 per gallon, rising slowly but steadily since the beginning of the year in conjunction with rising crude oil prices and refiner margins recovering from recent near‐historic lows. During this summer driving season (April through September) regular gasoline retail prices are projected to average $2.23 per gallon, down almost $1.60 from last summer. The average regular gasoline price for all of 2009 is expected to be $2.17 per gallon, increasing to an average of $2.42 in 2010. Diesel prices are projected to average about $2.27 per gallon during this driving season and to average $2.30 and $2.69 per gallon annually in 2009 and 2010, respectively. [emphasis added]
(Not surprisingly, EIA in its June 3 “This Week in Petroleum” reported the price of gasoline as passing $2.50 nationally. Some wag put this hed on its release: “EIA ‘Stimulated’ to Revise the Annual Energy Outlook 2009.”)
Tom Kloza, chief oil analyst at the Oil Price Information Service, at least ‘fessed up on May 22 that he was wrong that gasoline prices would not pass $2.50:
Prices have moved further and faster than I thought possible five months ago, or five days ago.
What did he miss? What did other “experts” miss? Why?
Mr. Kloza did add perspective about the impact of much-higher-than-predicted gasoline prices on economic recovery:
The increases probably mean that American’s will spend about $925-million or more each day on gasoline through the rest of May. That still compares favorably with last year, when the figure was closer to $1.5-billion per day.
I’m not the only person handing back my payroll tax cut, it seems. Here’s Ms. Romans again on June 8:
[The experts] were saying, “Don’t worry.” They were saying again and again, “Don’t worry because demand is not increasing.” …
Because of the bailout and now concern in global markets about how much money the United States is borrowing and spending, it’s weakening the dollar. And as the dollar weakens, people are concerned about inflation. And the hedge against inflation is commodities.
And so you’re seeing money flowing into crude oil because of concerns about the dollar and the future of this country. So even though you have demand down, we have a recession, we’re using less oil, oil prices are rising.
… And [$18] is how much more you’re paying to fill up your gas tank this year from the beginning of the year to now. … Now, it’s still much less than it was last year. … But keep in mind that takes away pretty much the president’s Making Work Pay tax cut. [emphasis added]
Is Ms. Romans’ report that experts say demand is heading down accurate? She did not say, perhaps because cable news gives her mere seconds to report on a complicated issue, demand is down from what? Or from when? According to Reuters, a May EIA analysis said differently:
The EIA forecast last month U.S. gasoline demand would rise to average of 9.15 million barrels per day (bpd) in June, up from the 9.07 million bpd consumed in June 2008.
It’s difficult for the audiences of journalists (or pundits or “experts”) to know whom to find credible. Yes, predicting the costs of oil at the wellhead and gasoline at the pump is tricky business. And journalists such as Ms. Romans rely heavily on government “experts” or Wall Street “analysts” to forecast such costs accurately. Why haven’t they? The government collects enormous amounts of data on energy. So do investment bankers and other economists. Why the misfired analyses in the past six months?
Analyzing the reasons for a misdiagnosis of an oil-driven economy is a news story. Where is it? There’s some, but it’s soundbite-driven and occasional.
Good journalists should be teaching their audiences much more about the economics of oil and gasoline and the impacts on the broader economy (journalism that is difficult) instead of merely telling audiences that they’re miserable (journalism that is easy and obvious). The oil and gasoline beats ought to consist of much more “eat-your-spinach” journalism rather than video of Joe or Jane Consumer at the gasoline pump, filling the family sedan and complaining about the rising cost.
Oh, I forgot. The newspaper industry has been shedding experienced journalists for nearly a decade. Perhaps there’s no one left to consistently and expertly report on economic issues that are difficult.