For as long as I can remember, we’ve been doing stories in journalism about gas prices. They are nearly always the same, based on figures from a local or regional arm of the American Automobile Association, either viewing-with-alarm about high prices or viewing-with-pleasure about low prices.
As it happens, virtually all reports about gas prices are about low gas prices, even the viewing-with-alarm ones. That’s because, though neither the AAA nor reporters writing these reports tell us so, 1. the U.S. has some of the lowest gas prices in the world and 2. when adjusted for inflation, the price of gas in the U.S. generally changes very little.
It was just 10 years ago, for instance, that journalists were in full viewing-with-alarm mode because gas prices had gone over $2.
A key year for all gas price coverage is 1973. That was the year when the United States had to get serious about the price of petroleum. In October 1973, the Arab members of the Organization of Petroleum Exporting Countries used their power as a cartel during the Yom Kippur War to stop shipping oil to nations that supported Israel against Egypt in the conflict, sparking what became known as the 1973 oil shock. Gas prices shot up fourfold, and, while they eventually came back down (and it took 10 years to happen), the world never returned to the low prices of the earlier 20th century.
Ten years ago, in 2004, I wrote in a news report, “Nearly all news coverage on this story has used raw dollar figures for gas prices. But when adjusted for inflation, the price is only moderately higher than the post-1973 low of January 1999. Prices were higher many times in the recent past (than now). The main reason they seem high now is that consumers have been spoiled by an extended period of low prices that began in 1996 and hit a post-1973 low in 1998.”
Nevada economist Thomas Cargill told me then that he believed reporters fail to convert gas price figures because “it takes most of the spectacularism out of the news if you deflate it. If you say, ‘Compared to 20 years ago …’ — that’s not news.”
I wasn’t convinced that reporters were that crafty. Rather, I thought they were lazy. They didn’t go to the trouble of learning how to convert current prices to allow for inflation so that they were comparing real prices 10 years ago with real current prices. Otherwise, Cargill was right.
Nearly always, U.S. gas prices are not only lower than in other nations but are lower than they were years earlier. If reporters were economically savvy, they would include a sentence like the one that begins this paragraph in every gas price story.
Right now the U.S. actually is in one of the highest gas prices periods in years — about equivalent to the price in 1980, a high price year — but having failed to make the proper comparison in earlier times, reporters now don’t know how to do the calculations when gas prices really are alarmingly high.
While gas price news coverage goes back decades, there’s another simplistic model for viewing-with-alarm that has evolved relatively recently. This is the technique of comparing the prices of items (hot dogs, hamburger, mustard, ketchup, buns, soft drinks, etc.) in a summer barbecue to last year’s prices and those of earlier years. Surprise! Reporters seem not to know how to calculate these things.
Fortune and Bloomberg News both do such comparisons, and they should have considerable expertise. Yet the Columbia Journalism Review reports: “Problem is, all of these stories are at best incomplete and at worst misleading. Food prices are volatile, and cherry-picking a handful of food products as a symbol for the overall change in food costs is more likely to fool readers than to tell them what’s really happening. And that’s true here. While the BBQ indices say the … costs are up more than 5 percent this year, Bureau of Labor Statistics data show that overall food prices are up just 2.1 percent.”
These nuances are rarely reflected in news coverage. Don’t plan your stock investments, or much of anything else, around them.
Dennis Myers is a veteran and Nevada journalist.