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What The Media Tell Americans About Free Enterprise

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Tuesday, September 26, 2000

Volume 8, Number 19

Oil Release Announcement Was Opportunity For Both Good and Bad Journalism

All three broadcast networks provided extensive coverage of President Clintonís decision, announced on September 22, to release 30 million barrels of oil from the nationís Strategic Petroleum Reserve, and all three of their evening newscasts dealt with the fact that Clintonís action had political overtones. "When you fiddle with oil prices, or attempt to fiddle with oil prices, in the middle of a presidential campaign, youíre going to get skepticism at the very least," ABCís Peter Jennings explained that night on World News Tonight.

But while most reporters seemed to understand that political motivations were in play (it is the fall of an election year), some seemed ill-equipped to deal with the factual questions that underlay each sideís arguments. "[Vice President Gore] was asked the question today in his first press conference in more than two months whether this crisis, if it is a crisis, really rises to the level of what the strategic reserve was originally designed for," ABCís Terry Moran related on September 22. "He said he helped write the strategic reserve, that he was involved in the lawmaking there and that, in fact, this is the kind of emergency that it was designed to address."

Moran seemed completely unaware that Gore was not, as he implied, a member of Congress in 1975 when the Strategic Petroleum Reserve (SPR) was authorized and initially funded. Gore was first elected to serve in the House of Representatives in November, 1976. Instead, Moran appeared to simply accept Goreís version "that he was involved in the lawmaking" as evidence that the Vice President was an expert on the original purpose of the SPR.

Contrast Moranís inexperience with NBCís Tim Russert, who interviewed Bill Richardson, the Secretary of Energy, on the September 24 edition of Meet the Press. Russert knew that the oil reserve couldnít legally be tapped simply to lower prices; the relevant provisions of the law focus on supply interruptions, emergency situations or energy supply shortages. Richardson acknowledged as much at his news conference on September 22, but Russert asked him again: "So, this is not about price. Itís about disruption of supply?"

"This is about disruption of supply," Richardson agreed. "This is to increase the supply. We are not trying to manipulate prices."

Then, Russert asked Richardson about comments made by his two bosses: "You say itís about supply, not price. And, yet, the Vice President and President seem to contradict that. They keep emphasizing price." He showed videotape of Gore speaking on Thursday ("In the face of rising prices for gasoline and home heating oil, I support oil releases from our national Strategic Petroleum Reserve") and Clinton speaking on Saturday ("Families shouldnít have to drain their wallets to drive their cars or heat their homes").

"Gore/Clinton keep saying itís about price," Russert told Richardson who, faced with the fact that his boss ó the man who actually authorized the oilís release ó had stressed the price benefits to consumers, lamely responded that "all of this is consistent." But Russert had effectively revealed to viewers the fact that Richardson was mouthing a legalistic line about "potential" shortages because such an argument was needed to conform with the statutory rules on SPR withdrawals.

Next, Russert placed the amount of oil that would be released to the market in its proper context. "The United States uses 20 million barrels a day," he told Richardson. "Yes," the Secretary agreed. "Youíre releasing 20 million barrels total. That would last 36 hours," Russert calculated. He could also have said that the released oil would amount to less than one percent of the total U.S. consumption from October 1 to March 31, when most Northerners would be heating their homes.

Richardson did not dispute the figure, but insisted that "the objective, Tim, is to produce, through refining capacity, from 3 million to 5 million barrels more of distellate, of home heating oil."

"But the refineries say theyíre working at full capacity and this will make no difference," Russert responded.

"No, theyíre at 96 percent," Richardson countered, adding, "we think the refiners can do this." Such a conclusion apparently depends on what your definition of "full" is.

The refinery question reflects a key issue thatís been missing from much of the coverage. After all, Americans consume refined products such as gasoline, heating oil or diesel fuel; crude oil isnít worth much without available refinery capacity. As the economy has grown over the past two decades, fuel consumption has naturally increased, but there has not been a corresponding increase in refinery capacity, which will eventually be necessary to meet the structural increases in demand. But "no new [refinery] plants have been built since the 1970s because of a spate of new rules," Investorís Business Daily reported on September 22.

Russert concluded by heading straight for the bottom line. "Will consumers still pay about 30 percent more in home heating this winter," he asked. Richardson vaguely said that "we expect prices slightly to go down."

"The Secretary of the Treasury said two cents a gallon at most," Russert continued. "And this is why itís being seen as a political ploy: youíre only using 30 million barrels, which is a day and a halfís worth; it is not going to drop the price all that much, unless you can guarantee this morning to consumers that their home heating is not going to go up 30 percent."

"What everybody wants, Tim, is moderation in oil prices," Richardson finally said. "The problem is increased demand and an exceedingly high price of crude. If we moderate those prices, if we improve the level of crude oil stocks in the world, in our country, and home heating oil stocks in our country, the effect is a positive one. The first one for us, to protect our consumers from a possible dire winter."

By the conclusion of the interview, Russert had effectively unmasked the decision to release oil as largely, if not completely, rooted in political calculation. As an interviewer, Russert had prepared himself for the interview by discovering the past law governing the Strategic Petroleum Reserve, the average daily U.S. oil consumption, current refinery usage, and projections of heating oil prices this winter.

Business reporters typically have such information available, or know which analysts to call upon for expertise. Consequently, most of the discussion of this issue on CNBC, CNNfn, and other business news outlets has gotten it right from the very beginning. On September 25, for example, CNNfn correspondent Greg Clarkin showed an oil industry analyst, Fadel Gheit of Fahnestock & Co., who reminded viewers that Clintonís action would mean little over the long run.

"It will give the politicians what they, what they believe the public wants to hear, and that is lower oil prices," Gheit explained. "But itís a Band-Aid. Itís a good solution in the near term, but it really doesnít get us anywhere in the long term."

The smart money apparently agreed with Gheit, as Clarkin noted that "brokerage houses told clients to buy oil stocks on weakness, saying the new oil does little to change the tight supply and demand problem."

Political journalists, though, are often put in the position of covering market issues, such as the oil price increases, without the resources typically available to full-time business correspondents. Kudos to Tim Russert, for challenging Richardson with the facts and offering viewers an informative look at the issues surrounding the Strategic Petroleum Reserve.

ó Rich Noyes


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