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What The Media Tell Americans About Free Enterprise

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Friday, March 24, 2000

Volume 8, Number 6

Networks Add Fuel to the Furor Over High Gas Prices

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 consumer."

What sort of danger? Adams didnít 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 NBCís Tom Brokaw stated on February 28.

Nominally, thatís 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 yearís increase was unusually steep, even though the price itself was hardly out of line with historic norms.

To their credit, ABCís Charles Gibson and CBSís 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. NBCís 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 itís 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 decline.

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 Ď30s, the average price per gallon was $2.24 in todayís terms. That dropped to $1.83 in the Ď40s and Ď50s, $1.73 in the Ď60s and Ď70s, and $1.59 in the Ď80s and Ď90s -- 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 oil.

The networks correctly reported that Clintonís proposals were not designed to provide short-term relief. Yet, according to the Cato Instituteís 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 wouldnít 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, thereís 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 thatís 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 canít hold out forever. Letís not do anything foolish in the meantime."


ó Rich Noyes


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