Enough Already On “Record High” Gas Prices

C’mon, people, doesn’t anyone know how to use a GDP deflator? Certainly the journalists writing articles like this at the Washington Post and the various and sundry wire services that have been feeding hyperbole to their readers have demonstrated their complete and utter inability to process the difference between real and nominal prices. Why don’t they get into such a tizzy and print articles on how our incomes have reached record levels?

Grr.

Meanwhile, here’s an interesting New York Times article on investment in drilling for oil and natural gas in the Gulf of Mexico, considered to be pretty dry. In this case the author makes the correct observation that as prices rise, investment in exploration goes up. He also highlights the role that technological change has played in enabling oil explorers to get product out of places that were impossible before.

I’m glad to see that not all journalists writing about this industry are economic thickies.

I had two students last quarter who are econ/journalism double majors, and I think they were mystified by why I kept encouraging them so vigorously, saying things like “we really need people with your combination of skills!”. This current gas price situation provides yet another data point supporting that argument.

UPDATE: Clearly Steve Verdon and I are both bugged about this, as indicated by his almost contemporaneous post on the same topic.


12 thoughts on “Enough Already On “Record High” Gas Prices

  1. I think it’s high time the Washington Post and other papers do an expose on their record high newspaper prices.

  2. Hey Lynne, what is they say great minds and all that. [grin]

    It is nice to know that there are some people out there who are studying both economics and journalism. Hopefully they can correct for these kinds of things.

    Neat article on the drilling for oil and natuarl gas.

  3. “Why don’t they get into such a tizzy and print articles on how our incomes have reached record levels?” Because the media consider it axiomatic that only _BAD_ news sells papers… 🙁

  4. I too am disgusted with the economic ignorance on display; however, I’m going to dissent on this one.

    I don’t blame economically ignorant reporters for running with the unadjusted numbers, since the Energy Information Administration‘s own weekly update doesn’t even provide inflation adusted numbers.

    The WaPo article refers to AAA data, which are also nominal. Their site has a wonderfully stupid “highest recorded price” table, which at this point is updated daily.

    If the experts–government and private organizations–collude to spoonfeed reporters shocking statistics and stories of all-time high gas prices, and no boss, colleage, or reader disputes or refutes reporters’ analysis, I don’t see why reporters would care to investigate any further.

    An alternative theory would have the reporters understanding exactly what they’re doing, colluding with the government and private organizations…

  5. Oh, one other thing: you guys still pay only a third of what we pay for gas in Europe.

  6. MAN WANTS TO HELP RICH OIL COMPANIES GET RICHER

    BOCA RATON, Fla. — One American is
    encouraging citizens to do something about the steep hike in gas prices, and he’s doing it through sarcasm.
    Stan Cotton, the founder of the Foreign Oil Independence League, has published a 134-page book titled “How to Help Big Oil Companies Make Obscene Profits” and on every page is the
    sentence “Do nothing.”
    Cotton says 98.2 percent of Americans must favor big oil because they aren’t fighting back.
    His book is meant to be a kick in the butt for Americans to start making waves and put and end to the greedy oil companies’ ways.
    Cotton says Americans can make an “apathetic statement” by going to his website joinfoil.org and buying a t-shirt with Osama bin Laden’s face on it and the phrase “Hey bin Laden, you can count on my gas money to finance your terrorism.”
    You can also make a “patriotic statement” at the site by purchasing a bumper sticker of Uncle Sam saying “I want you to get off your gas.”
    Cotton hopes the shirt and sticker start a dialogue
    among apathetic Americans.

    http://www.prweb.com/releases/2004/4/prweb118275.php

  7. I’m a journaist and I can use GDP deflation to properly index gas prices in a historic context.

    Of course, I can also use “real wage” adjustments to see that people, on average, spend a higher percentage of their income on fuel related costs than they have before. Hence, as a percentage of net income, fuel is more costly than it ever has been before.

    Silly neocon….GDP and median wage aren’t the same thing. They’re not even close.

  8. Check that,

    I forgot that in the last three years my income has outpaced the cost of heating fuel, gasoline, food, and the housing cost spike.

    Had I not been making 60 percent more than I did in 2001 though….you could see how this would be a problem.

    -Cubicle

  9. I’m from Canada, and received an email proposal:
    pick the two biggest gas companies (here it is PetroCanada and Shell) and for the rest of the year, don’t purchase gas there.
    Perhaps this will force those companies to lower prices. We are also supposed to pass that idea on to 10 people, who pass it on…potentially reaching millions within days. Good idea? I sure think so.

  10. people need to understand that there is only one thing that will stop the high prices, that is if people got together as one and marched in protest all across this country and put faces with words. i have been trying to get this started but it seems that no one really cares. they will complain to each other but are scared to put there face with there voice and be heard and seen. if someone can help me get this started i will be more than happy to speak against what is going on. the way the government wins is by dividing people up and that is exactly what they have done.

  11. Don’t shop at the two biggest gas companies? Will that lower the price? Maybe, by not a significant amount. They can just sell their gas to the other companies that are not boycotted. Plus those companies are so big that they sell gas to most of the other “ma and pop” chains.

  12. Kevin B: thanks for the links to the EIA. Like Lynne, I teach my statistics students about adjusting for inflation, and I’m always looking for good time series. This semester is crude oil and blockbuster movies!

    Lynne: what’s the advantage of using a GDP deflator vs. the CPI? (asked the statistician of the economist)

    Eric: the only way your approach will lower prices is if you all band together and march back and forth to work every day, instead of driving. Carry a sign, so I can honk as I drive by.

    Jeanette and Ron: think economics, dang it! Retail gasoline is often priced differentially in zones; there’s often a 15-cent range here in San Antonio. BUT, there’s also a daily weblog with the 10 cheapest gas stations, so lots of us buy there, and help control prices where we can–at the margins. It seems to be working, for example: yesterday I used a local Shell coupon to buy “the good stuff” for less than the price of regular at the neighborhood ice house. Oh, and Jeanette, nix on that “pass it on to 10 people” thing. We all get enough fg@$#5&!g spam as it is.

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