Gasoline prices have risen by more than 20 cents per gallon this
year and many network reporters have responded by calling the price
increases a "crisis" for the American economy. But sensational TV
coverage has obscured the fact that gas prices have merely returned
to a level consistent with historical averages, and that prices
actually have been trending lower for most of the past 80 years.
The media hype has, however, contributed to the politicization of
fuel prices, and politicians from the President on down are offering
a variety of government-based solutions in reaction to the supposed
crisis. Absent from the media cacophony has been the advice of many
free marketers: do nothing.
The latest round of coverage began after a mid-March survey
showed average gas prices surging past $1.50 per gallon. "Analysts
are already worried that sustained oil price increases will
eventually rip holes through the U.S. economy," fretted NBC
Nightly News weekend anchor John Seigenthaler on March 11.
On the CBS Evening News, correspondent Jacqueline Adams on
March 6 termed the price increases a "crisis," and related that
"just outside New York City and in California, the pump price is 22
cents higher [than two weeks earlier], even closer to the $2.00 a
gallon number that analysts say spells danger for the typical
What sort of danger? Adams didn’t say, but her colleague Dan
Rather offered this sobering aside to viewers on March 13: "You may
want to note that the combination of higher gasoline prices and
higher interest rates sometimes in the past has led to recession."
From January 1 through March 22, the increases in gas and oil
prices garnered a total of 60 stories -- 23 anchor-read briefs and
37 field reports -- on the three network evening newscasts. Many of
these reports argued that gas prices were "sky high," as Rather
asserted on March 2, or at "an all-time high," as NBC’s Tom Brokaw
stated on February 28.
Nominally, that’s true, but only two stories bothered to point
out that, when eighty years of inflation is taken into account,
gasoline remains moderately priced. Indeed, as year-by-year figures
compiled by the
American Petroleum Institute (API) demonstrate, gasoline prices
are just now bouncing back from historic lows. (See chart.)
From 1920 through 1992, the retail price of gas sold at the pump
averaged $1.91 a gallon, adjusting for inflation. That dipped to an
average of just $1.36 from 1993 to 1997, and slipped even further to
a record low $1.16 per gallon in 1998. The price rebounded only
slightly to $1.24 last year as OPEC began trimming its production,
before finally surging to $1.57 in March of this year as the
production cutbacks began to affect the market.
Those numbers help explain why the jump at the pump was such a
shock -- the rate of this year’s increase was unusually
steep, even though the price itself was hardly out of line with
To their credit, ABC’s Charles Gibson and CBS’s Jim Axelrod both
mentioned this point in stories that aired in mid-March. Axelrod, on
March 13, accurately reported that "even with these record hikes,
inflation-adjusted gasoline today is about even with prices just
prior to the gas lines of the mid-70s." Three days later, Gibson
allowed that "gas now costs an average of $1.53 across the country.
When inflation is factored in, the average price over the last 50
years is $1.46, only a few cents lower."
Apart from those two references, however, no network reporters
accurately placed the current price of gas in context. NBC’s Robert
Hager actually used the inflation-adjusted figures to argue that
current prices were extreme.
Not quite. Using inflation-adjusted numbers, the current price is
the highest it’s been since 1985, when it cost an average of $1.89 a
gallon to fill your tank. That was lower than the rate of $2.51
reached in 1980, the last time there were gas lines, and lower than
the peak of $2.53 reached in 1981 before the price began to steadily
Indeed, the real story behind these numbers is that, despite all
of the volatility introduced by OPEC price-fixing, U.S. gas prices
have been dropping fairly steadily for most of the 20th century. In
the 1920s and ‘30s, the average price per gallon was $2.24 in
today’s terms. That dropped to $1.83 in the ‘40s and ‘50s, $1.73 in
the ‘60s and ‘70s, and $1.59 in the ‘80s and ‘90s -- or right about
where they are today.
However, heavy media coverage has apparently enticed some
politicians to take an election-year stand against expensive oil.
President Clinton, for example, proposed the creation of a second
government oil reserve which would store as much as 2 million
barrels of home heating oil. In his weekly radio address on March
18, Clinton also asked Congress to re-authorize the existing
Strategic Oil Reserve, which holds 560 barrels of unrefined crude
The networks correctly reported that Clinton’s proposals were not
designed to provide short-term relief. Yet, according to the Cato
Institute’s Jerry Taylor, the whole notion of government oil
reserves ensures that fuel prices remain a political issue, and may
actually exacerbate price volatility. Indeed, the best energy policy
is no energy policy, Taylor argued in a Wall Street Journal
op-ed that was published on March 13 -- but that was a message you
wouldn’t have heard on the evening newscasts.
"Oil is like any other commodity," Taylor wrote. "High prices
will encourage new production, more efficient consumption and
alternative fuel use. And if politicians really want to provide
relief to consumers, there’s an easy way to do so: cut, or even
abolish, the federal gasoline tax, which currently adds 18.4 cents
to the price of a gallon of gas."
The implicit message in much of the media coverage of the latest
oil "crisis" is that government should step in and tighten its
regulation of the oil market. But Taylor and other free marketers
say that’s misguided.
"We should hold tight and wait OPEC out," he wrote in his op-ed.
"The market will moderate prices. High prices will tempt OPEC
members to cheat on their production quotas. Oil supply is growing
larger, not smaller. Under such conditions, OPEC can’t hold out
forever. Let’s not do anything foolish in the meantime."